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Savings rates continue to improve, however, due to a dramatic rise to inflation, not one standard savings account can beat its eroding power.
The Consumer Price Index (CPI) rose to 3.2% during August 2021 up from 2.0% in July 2021. This is the highest level seen since records started in 1997. There remains no single savings account that can outpace inflation. The highest cash savings rate available right now is from Atom Bank at 1.86% for a five year fixed rate bond. This is an improvement compared to 18 August 2021 when the top rate was 1.72% for a five year fixed deal. But, while rates are increasing they are lagging far behind the pace of inflation and even the best rates just prior to the start of the pandemic would not have kept pace. On 18 September 2019 the top return in the market over five-years was 2.45%.
Those needing to save into a cash ISA face even worse news with rates here only reaching 1.50% for a five year fixed rate cash ISA. This means that savers should only use cash ISAs if they are likely to exceed their personal savings allowance and as a result could face paying tax on their interest income.
A combination of low cash savings rates and rising inflation could make investing a more attractive option for some savers. Investment returns have consistently out performed cash savings, but they do come with significantly greater risks including the loss of capital and returns are not guaranteed. In August we reported that the top five ISA unit trust funds had achieved returns over the past 12-months had seen returns of between 61% and 84%.
Savers can use an investment platform and open an account to make investments into funds and into shares on the stock market. This includes the option to invest using an ISA wrapper - savers should note the maximum investment allowed into an investment ISA is £20,000 per tax year.. Alternatively savers can look to open a specific stocks and shares ISA.
Provider |
Min monthly investment |
Number of funds available |
|
Interactive Investor |
£25 |
3,000 plus |
|
Barclays Smart Investor |
£0 |
2,000 plus |
|
Foresters Friendly Society |
£50 |
1 |
|
BMO Asset Management |
£50 |
10 |
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Global stock markets ended 2021 on a high, with the FTSE 100 finishing 14.3% up on the start of the year and the S&P 500 close to a 27% gain over the same timescale. Performance in 2022 will be dependent on many factors, including inflation, economic growth and the progress of the pandemic but also monetary policy and the potential for more interest rate increases.
Global stock markets ended 2021 on a high, with the FTSE 100 finishing 14.3% up on the start of the year.
Savers will be disappointed not to see their interest increases keep up with inflation. “Savers have been dealt another blow this month as inflation rises once more and is unbeatable with any standard savings account,” said Rachel Springall, Finance Expert at Moneyfacts. At the time of writing, there is not one savings account which can outpace the current CPI. Furthermore, the latest Moneyfacts data shows that average savings accounts have been marginally increasing over the past six months, but not as fast as inflation. The notice account increased interest rates on average by 0.06 percentage points, from 0.47% gross to 0.53% gross, in the past six months. In comparison the 5-year fixed rate account increased interest on average by 0.34 percentage points, from 1.17% gross to 1.51% gross, in the same period. This means that the money savers have earned is becoming less valuable. In contrast, CPI stood at 3.1% in September 2021, which is 2.4% lower than the current rate. “There are still savers out there waiting for the December 2021 base rate rise to be passed onto them, let alone the most recent uplift of 0.25% a couple of weeks ago. Those savers with the patience to wait may wish to reconsider their loyalty, particularly as they will not find a high-street bank featured in the top rate tables,” said Springall. Those with a vested interest in an Individual Savings Account (ISA) will experience similar disappointment in the latest inflation rise. Rates in the ISA market are continuing to stagnate, according to the latest Moneyfacts Treasury Report, which means you could wait for a better deal if interest rates rise in the coming weeks.
The latest Consumer Price Index (CPI) rose to 5.5%, the highest it has been recorded in the past three decades. So how will this impact your spending habits?
National Savings and Investments (NS&I) has released a second issue of its Green Savings Bond, which is double the interest rate of its first issue. The new issue will offer investors a fixed rate of 1.30% annual equivalent rate (AER) over a three year term, and is available to purchase today. It is an improvement on the first version, which was launched in October at 0.65% AER for a fixed three-year term. “The decision to increase the rates by NS&I is not a surprise,” said James Blower, Head of Digital at Moneyfacts. “It looks highly likely the decision to increase rate has nothing to do with market conditions but limited take-up from savers,” he explained. The Green Savings Bond is designed to help fund the Government’s green spending projects for a sustainable future. Investors can purchase these bonds with a minimum of £100 or a maximum £100,000 per person. “This new Issue means that savers can save at a new competitive rate while also supporting the UK’s green agenda in six key areas to help make our environment greener, cleaner and more sustainable,” said Ian Ackerley, Chief Executive of the NS&I. Although the support for these green projects is welcome, savers could find better rates on the market, according to Rachel Springall, Finance Expert at Moneyfacts. “Some savers may not be too keen to lock their money away for two or three years, but there are plenty of fixed bonds for 12 to 18 months that pay over 1.40%, there are even some notice accounts too paying over 1%. Savers could also consider putting their cash in a savings account with a building society, which supports local causes,” she said.
National Savings and Investments (NS&I) have has released a second issue of their its Green Savings Bond.
Global stock markets ended 2021 on a high, with the FTSE 100 finishing 14.3% up on the start of the year and the S&P 500 close to a 27% gain over the same timescale. Performance in 2022 will be dependent on many factors, including inflation, economic growth and the progress of the pandemic but also monetary policy and the potential for more interest rate increases.
Global stock markets ended 2021 on a high, with the FTSE 100 finishing 14.3% up on the start of the year.
Savers will be disappointed not to see their interest increases keep up with inflation. “Savers have been dealt another blow this month as inflation rises once more and is unbeatable with any standard savings account,” said Rachel Springall, Finance Expert at Moneyfacts. At the time of writing, there is not one savings account which can outpace the current CPI. Furthermore, the latest Moneyfacts data shows that average savings accounts have been marginally increasing over the past six months, but not as fast as inflation. The notice account increased interest rates on average by 0.06 percentage points, from 0.47% gross to 0.53% gross, in the past six months. In comparison the 5-year fixed rate account increased interest on average by 0.34 percentage points, from 1.17% gross to 1.51% gross, in the same period. This means that the money savers have earned is becoming less valuable. In contrast, CPI stood at 3.1% in September 2021, which is 2.4% lower than the current rate. “There are still savers out there waiting for the December 2021 base rate rise to be passed onto them, let alone the most recent uplift of 0.25% a couple of weeks ago. Those savers with the patience to wait may wish to reconsider their loyalty, particularly as they will not find a high-street bank featured in the top rate tables,” said Springall. Those with a vested interest in an Individual Savings Account (ISA) will experience similar disappointment in the latest inflation rise. Rates in the ISA market are continuing to stagnate, according to the latest Moneyfacts Treasury Report, which means you could wait for a better deal if interest rates rise in the coming weeks.
The latest Consumer Price Index (CPI) rose to 5.5%, the highest it has been recorded in the past three decades. So how will this impact your spending habits?
National Savings and Investments (NS&I) has released a second issue of its Green Savings Bond, which is double the interest rate of its first issue. The new issue will offer investors a fixed rate of 1.30% annual equivalent rate (AER) over a three year term, and is available to purchase today. It is an improvement on the first version, which was launched in October at 0.65% AER for a fixed three-year term. “The decision to increase the rates by NS&I is not a surprise,” said James Blower, Head of Digital at Moneyfacts. “It looks highly likely the decision to increase rate has nothing to do with market conditions but limited take-up from savers,” he explained. The Green Savings Bond is designed to help fund the Government’s green spending projects for a sustainable future. Investors can purchase these bonds with a minimum of £100 or a maximum £100,000 per person. “This new Issue means that savers can save at a new competitive rate while also supporting the UK’s green agenda in six key areas to help make our environment greener, cleaner and more sustainable,” said Ian Ackerley, Chief Executive of the NS&I. Although the support for these green projects is welcome, savers could find better rates on the market, according to Rachel Springall, Finance Expert at Moneyfacts. “Some savers may not be too keen to lock their money away for two or three years, but there are plenty of fixed bonds for 12 to 18 months that pay over 1.40%, there are even some notice accounts too paying over 1%. Savers could also consider putting their cash in a savings account with a building society, which supports local causes,” she said.
National Savings and Investments (NS&I) have has released a second issue of their its Green Savings Bond.
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