The Money Stats are out today and find that savers are getting worse returns on what they put away than ever before. With price rises in the shops, what you’re saving will buy you less even with interest payments.
When the Bank of England cut its base rate to 0.25% from an already historic low of 0.5% in August last year, it was bad news for savers who were already getting near-zero returns.
An instant access savings account interest is just 0.15% including bonuses, and even an ISA gives you only 0.43% back on what you save. Though comparable historical figures are hard to find, we believe this is the lowest it has been in a lifetime, certainly in the last 60 years.
These record low rates probably explain why people are saving a historically low 5.6% of their income, or £1,480.44 on average every year.
If someone deposited this sum in an average instant access savings account for twelve months, they would receive £1.78 in interest after tax. If they saved it in average cash ISA, they would receive £6.37.
Once you factor in inflation of 1.8%, money you put away is actually shrinking in terms of what it can buy you in the shops!
All of this might make grim reading and make you question whether saving really is the right thing to do anyway. But you should not give up. We all need a buffer, whether that is growing on its own or not. And interest is paid on the sum you have deposited, so if you put more in now, it will make returns when rates rise, as they are predicted to in the coming months.
Michelle Highman, Chief Executive of The Money Charity says:
“The Bank of England has pushed base rates to the historic low of 0.25%, and the actual return you get on what you save seems to be getting ever worse. As long as it lasts, this is great if you’re borrowing, but at The Money Charity we fear that not enough is being done to support savers.”
“But you should not give up! If you can, we always encourage you to put money aside for a rainy day or to achieve your financial goals. There might not be much interest now, but you will still be able to have the security of whatever you save. And interest rates will rise one day!”
Other key points from February’s Money Statistics include:
- 15 properties are repossessed every day, or one every one hour and 34 minutes.
- 52 mortgage possession claims and 32 mortgage possession orders are made every day.
- Outstanding consumer credit lending was £192.95 billion at the end of December 2016.
- 121,000 people (1,315 a day) reported they had become redundant over the three months, little changed from the previous quarter.
Get the full picture, and many more fascinating facts about money in the UK in our monthly Money Statistics.