Low base rates are hurting savers

Tags: Low Base Rates

With base rates remaining at just 0.5% and many savings accounts paying below that level, individuals should regularly look to see if they can switch their investments to obtain a better return, without taking any undue risks. The recent turmoil in the Eurozone has resulted in greater volatility, and therefore risk, in the stock market and investors will be nervous investing overseas at this time.

Within the UK, banks and building societies are the traditional homes for investment, along with government bonds and savings accounts. Individuals choose to save for a variety of reasons including :

• To give a buffer for rainy day needs.
• To build up a deposit for property.
• To make a large purchase, e.g. vehicle, holiday
• Fear of unemployment or other loss of income.
• To earn interest.

Banks and Building societies will be aware that their investors include pensioners and persons that are dependent on their savings to meet their daily needs. They will always offer a good range of savings products to allow choice and options depending on the individuals’ needs.

Customers save with a local building society or a high street bank for a number of reasons:

• Safety of their deposits and access to funds
• Tax free investments (ISA range)
• Suitable, tailored products.
• Regular monthly savings accounts
• Customer service, trust.

Current market offers improved options

In recent weeks we have seen improved rates available in the UK savings market, and this may offer investors a higher return without undue risk. At Loughborough Building Society we know that many savers require monthly interest and we have therefore launched a new monthly interest account.  A new monthly savings product is also being offered to those investors who can put a regular amount aside each month. The pay rate on this type of product is always well above base rate.

Fixed rate bonds remain an important part of a savings portfolio, especially where the individual will not need access to the funds for a specified period. As always the decision to take a fixed rate product depends on the individuals’ view of future movements in interest rates.

Tax free savings are always popular and ISA accounts can be opened at any time within a tax year, by an individual aged 16 or over. Additional sums can be added at any time up to the maximum annual limit, currently £5,340 for the 2011/12 tax year.

Looking ahead into 2012

Base rates are expected to remain at 0.5% for many months to come, and this will continue to be painful for many investors.

However they can still look around for products that meet their needs. With safety of investment the key and always balancing risk and reward, local building societies are offering some excellent and competitive products on the High Street.

Colin Bradley