Savings Interest rates are closely linked to the Base Rate set by the Bank of England. The Base Rate hit an all time low of 0.5% in March 2009 and has been stubbornly stuck there since. So what should you do with your money ? Gamble it all on the lottery or roulette – well we have some suggestions for much safer options to give you a return on your cash. Read on to find out more ..
What interest rates can I get ?
According to statistics, in August 2012 savers could have earned 3.19 per cent on an instant-access savings account, the best is now just 1.30 per cent. Fixed-rate savings have also fallen victim. At the start of 2013 savers could have grabbed a 3.5 per cent rate for a one-year fix and a 4.5 per cent rate for five years. Even cash Isas haven’t been immune to the savings meltdown. Back in August 2012, you could get your hands on a 4.15 per cent rate. Today, that has fallen to 2.75 per cent while the highest easy access cash Isa you can get your hands on pays just 1.65 per cent.
What should I do to get the best Interest Rates on my savings?
Fixed Rate Bonds
The problem with any fixed-rate account is that savers must be willing to lock their cash away and typically limit the amount they can put in each year. Fixed Rate Bonds are a good way to achieve a good interest rate for your savings. If you’re looking to invest a lump sum, a fixed rate bond could be perfect. It pays a guaranteed amount of interest for a set length of time. You probably won’t be allowed to access your savings during the fixed term, so invest money you can afford to lock away.
With Bonus accounts you literally get a cash bonus for doing nothing. Bonus accounts give you an incentive of a higher interest rate – or a bonus rate for each calendar month you don’t make a withdrawal. You can often start saving from as little as £1, where you can get the bonus rate up to a £100,000. The bonus rates accounts offer you a higher interest rate the longer you leave you leave your cash tied up, with the Halifax offering two per cent fixed over eighteen months while Coventry Building Society 2.75 per cent over four years.
Stock and Shares ISA
If you are willing to accept more of a risk on your return then a stocks and shares ISA can be a good way to improve your return. It may still be called an ISA, but a stocks & shares ISA is very different to a cash ISA, which is simply a savings account you don’t pay tax on. With a stocks & shares ISA you’re investing in things such as:
- Corporate and government bonds. You basically lend your money to a company or a government in return for interest (don’t confuse these with fixed-term bonds, which are basically savings accounts held for a certain period of time).
- Shares. You invest in individual companies. Owning a share is like owning a brick in a house wall. If the price of the house (company) goes up, so does your brick (share), and vice versa.
- Funds. Most people use funds when investing. These can include bonds, shares, a mixture of the two, or in some cases, cash. Most funds have a specific theme, around which all the investments are based.
Remember that shares can always go down so there is much less security in this option – please read up or ask a financial advisor for advice if you are unsure. This is a helpful artice with more indepth advice.