Showing posts with label cash. Show all posts
Showing posts with label cash. Show all posts

Saturday 1 May 2010

Average UK savings interest rates – April 2010 Update

My chart today shows that for those that are looking to save it still isn’t getting any better out there. If you don’t want to lock your money up for greater than 2 years (I know I don’t with what I see going on with inflation) then the average interest rate on savings accounts continues to decline.

Monday 8 March 2010

Average UK interest rates for savers

Previously I described how I was struggling to find a home for cash that could generate a real return after inflation and tax. The best rate I could find for a basic no frills easy access account was 2.5% but my chart today shows how bad it really is out there.

Thursday 25 February 2010

A home for cash

UK Retail Prices Inflation (RPI) is currently running at 3.7%. This means that if you are a UK basic rate taxpayer that to just stand still you need to be earning interest of 4.63%. It’s even worse for higher rate taxpayers, you need to be earning 6.17%.

So what’s available out there? A quick look at MoneySavingExpert shows that the best ‘clean’ account, which is one that plays no tricks like introductory bonuses or withdrawal penalties, is paying interest of 2.5%.

This means that even with this account the basic rate taxpayer is every year is losing 3.7% - 2.5% + 2.5% x 20% tax = 1.7% of purchasing power on their cash holdings and the higher rate taxpayer is losing 3.7% - 2.5% + 2.5% x 40% tax = 2.7%. So if you are a prudent saver you are being punished while if you are in debt up to the eyeballs your debt is gradually being eroded by the wonderful [sic] inflation that we are seeing. This is thanks to the Bank of England base rate of 0.5% plus the great management that the government is showing.

I’ve protected myself as well as I can by having a significant portion (17.6% of total assets) of the low risk (cash and bonds) portion of my current low charge portfolio in NS&I Index Linked Savings Certificates which is giving me a real positive return. Unfortunately a new Issue of these has not been offered for some time and so I can’t put any more money here.

A little over 3% of my cash is sitting offshore in a ‘clean’ account paying interest of 4.25%. I’m losing money in real terms daily however at least it’s better than the best UK ‘clean’ account rate of 2.5%.

The remainder is in a ‘clean’ UK based account paying 2.1% interest. This is losing significant purchasing power however I feel powerless to do anything about it. I see no option at the moment but to sit tight and hope that one day my prudence is rewarded. Does anyone have a better option?

As always DYOR.