What’s the latest news from the savings market? We monitor all the latest moves and keep you updated regularly with the key developments.
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13 October: First Direct To Double Cash ISA Rate
First Direct is doubling the interest rate on its cash ISA from 0.70% to 1.40% AER (variable) on 20 October, writes Bethany Garner.
The mobile-first bank is also raising rates across three other savings products. Its easy access Savings Account will pay 0.50% AER (variable) from 20 October — up from 0.40%.
Its Bonus Savings Account will pay up to 1.65% AER on balances below £25,000, and 0.75% AER on balances above £25,000. The account rewards savers for not accessing their cash. If they make a withdrawal, the new rate drops to 0.50% AER for that calendar month.
From the later date of 28 October, First Direct’s one-year Fixed Rate Saver will rise by a full percentage point, from 1.25% to 2.25% AER.
First Direct is the latest of several providers to increase rates on its savings accounts in response to consecutive Bank rate hikes.
While news of increases is welcome, stubbornly high inflation is still eroding any real returns on savers’ cash. With annual inflation running at 9.9%, the onus is on savers to compare deals and find the highest-paying account for the access required to their cash.
5 October: Barclays Rainy Day Saver Pays Up To 5.12% AER
Barclays has launched a linked savings account paying a top rate of 5.12% AER (variable), writes Bethany Garner.
The bank’s new Rainy Day Saver is an easy access account which allows eligible savers to make unlimited deposits and withdrawals – and can be opened with just £1.
At 5.12% AER, the returns on the account are more than double those offered by leading open-to-all easy access savings accounts.
However, only Barclays current account holders who are signed up to the Blue Rewards scheme are eligible. Blue Rewards charges a monthly fee of £5 but, providing your Barclays current account is credited with at least £800 a month and has at least two outgoing direct debits set up, this fee is repaid into your Rewards Wallet. This can be accessed and managed online or on the Barclays app.
The top rate of 5.12% AER only applies to balances of up to £5,000. Any balances above this threshold earns a much lower 0.15% AER (variable).
You can hold up to £10 million in the Rainy Day Saver but savers with more than £5,000 who don’t need access to their cash will find higher returns from a fixed rate savings account.
For example, £10,000 deposited in a fixed rate bond paying 4.50% AER would earn £450 in 12 months. The same deposit left untouched in Barclays’ Rainy Day Saver for 12 months would earn £263 of interest.
5 October: Headline Rate Hits 4.75%
Nationwide Building Society is launching three fixed rate online bonds and raising interest rates for several other accounts, writes Bethany Garner.
The UK’s largest building society is now offering:
- one-year fixed rate bond paying 4.00% AER
- two-year fixed rate bond paying 4.50% AER
- three-year fixed rate bond paying 4.75% AER.
Each account can be opened and managed exclusively online or through Nationwide’s mobile banking app. The minimum opening deposit is £1.
Meanwhile, the interest paid on Nationwide’s existing fixed rate accounts is set to rise by 0.50%:
- one-year fixed rate bond will now pay 3.25% AER
- two-year fixed rate bond will now pay 3.50% AER.
Nationwide has also announced it will increase rates on its triple access savings accounts.
The One Year Triple Access Online Saver will pay 2.10% AER — up from 1.75% — and the One Year Triple Access Online ISA will now pay 2.00% AER, up from 1.50%.
These accounts allow up to three withdrawals throughout their 12-month term. If any additional withdrawals are made, the interest rate drops to 0.30% AER.
Nationwide’s Flex Instant Saver account, which allows unlimited deposits and withdrawals, will see rates doubled from 1.00% to 2.00% AER over the next 12 months. This account is available to Nationwide current account holders only.
The society is offering a £200 switching incentive to those who switch to its current accounts from other banking providers.
Tim Riley, director of banking and savings at Nationwide, said: “We understand there are plenty of savers who are happy to lock their money away for a period of time, which is why we will be offering highly competitive rates on our bonds.”
29 September: Family Building Society Offers Premium On Bank Rate
The Family Building Society has launched a Two Year Tracker Rate Bond — a savings account with a variable interest rate that moves in line with the Bank of England Bank rate.
Currently at 2.60% AER (gross), the account’s interest rate is set at 0.85% above the current Bank rate. It changes to track the Bank rate as it stands on the first day of each month.
The Bank rate rose from 1.75% to 2.25% in September, so the bond will pay 3.10% AER from 1 October.
To open the account, savers must deposit at least £5,000. Once 15 days have elapsed, no additional deposits can be made. Withdrawals are not permitted until the account matures two years after opening.
It’s worth nothing that some fixed-rate savings accounts are currently paying higher rates. For instance, the 2-Year Fixed Term Deposit from Investec offers an AER of 4.25% (gross) on balances from £1,000.
However, if the bank rate continues to rise – it has risen seven times since December 2021 – the Family bond could outpace these top-paying accounts.
With annual inflation at 9.9% eroding the value of savings, an account that passes on bank rate rises to consumers without requiring them to shop around could be beneficial.
If the bank rate goes down, though, savers locked into this two-year fixed term account could miss out on better returns elsewhere.
27 September: NS&I Adds £76 Million To Premium Bonds Prize Fund
National Savings and Investment (NS&I), the Government-backed savings bank that oversees Premium Bonds, is raising its prize fund from 1.40% to 2.20% from 1 October 2022.
The change will add around £76 million to the Premium Bonds prize fund, creating 97,752 new prizes in the monthly draw.
Most of these will be cash sums of £50 or £100, but the number of larger prizes is also rising. From October, the number of £100,000 prizes will increase from 10 to 18, while the number of £50,000 prizes will rise from 20 to 35.
There will continue to be just two £1 million prizes each month.
Overall, the odds of each Premium Bond being a winner will improve from 24,500 to 1, to 24,000 to 1.
Ian Ackerley, chief executive of NS&I, said: “This is the second increase to the Premium Bonds prize fund rate that we have made in less than six months.
“These changes have helped us ensure that Premium Bonds remain attractive, while also ensuring that we continue to balance the interests of savers, taxpayers and the broader financial services sector.”
Premium bonds are held by over 21 million people in the UK. Instead of earning interest, bond holders are entered into a monthly prize draw for tax-free cash sums, which range in value from £25 to £1 million.
Each £1 invested in Premium Bonds equates to one entry into the prize draw, but the minimum investment level is £25. Savers can choose to cash out all or a portion of their bonds at any time.
Although winning a large cash prize may help some savers beat inflation, they could equally win nothing.
Laura Suter, head of personal finance at AJ Bell, said: “Savers shouldn’t cling to the ‘projected prize fund figure’ as many Premium Bonds holders get zero return on their savings.“Most savers would be better off with a standard easy-access savings account that pays out a guaranteed rate of interest.”
26 September: Over 11 Million Brits Have Less Than £100 In Emergency Funds As UK Savings Week Gets Underway
An estimated 11.5 million UK adults have less than £100 in emergency savings, according to research by the Building Societies Association (BSA) – the organisation behind the inaugural UK Savings Week which starts today.
The campaign aims to raise awareness of the importance of saving habits, and offer guidance to consumers on reaching their saving goals.
Andrew Gall, head of savings and economics at BSA, said: “While the midst of a cost-of-living crisis might seem like an odd time to launch activities encouraging good savings habits, those who are able to save can benefit from building their resilience to future shocks.”
The BSA’s research, which surveyed 2,000 UK adults in August 2022, revealed that a growing number of consumers are dipping into savings to meet everyday expenses.
According to the survey, 36% of consumers are turning to savings to meet the mounting cost of essentials. A further 55% of savers say they are setting aside less due to cost-of-living pressures, while 35% have stopped saving altogether and 13% have no savings at all.
However, the research also found that 64% of respondents, who currently have no savings, say they would be able to set aside £10 a month.
A significant portion of consumers may not be getting the best returns, however. Almost a quarter (23%) of savers do not check interest rates before opening an account, while a third (33%) check rates but do not compare them with other accounts.
While some savings providers have begun passing on the benefit of the latest interest rate rise to savers in the form of more competitive savings accounts, many have yet to do so.
And with annual inflation running at 9.9%, effectively eroding the value of cash more quickly, the onus is on savers to compare deals and find the highest-paying account for the access required to their cash.
22 September: Returns Inch Higher But Savings Still Battered By Inflation
Savers were handed positive news today when the Bank of England’s rate-setting Monetary Policy Committee (MPC) raised interest rates for the seventh time in a row. At 2.25% the Bank rate is now at its highest level in 14 years.
Yorkshire Building Society was quick off the mark following the announcement. Within minutes of the news, it confirmed it will raise interest rates on all its variable rate savings accounts – but by 0.30 percentage points compared to the 0.50 percentage point increase in the Bank rate.
The society’s easy access Internet Saver Plus Issue 12 will pay 1.80% AER from October. The rate on its Loyalty Regular Saver Issue 2 will rise to 5.3% AER.
The rates will be applied to accounts automatically on 5 October. Other banks and building societies are expected to pass on rises to customers in the coming days.
Marcus by Goldman Sachs has also announced it will be raising rates on both its variable rate accounts — the Online Savings Account and Cash ISA – by 0.30%.
Both accounts are currently paying 1.80% AER, which includes a 12-month bonus rate of 0.25%. Remember this bonus rate will drop off on the anniversary of opening the account, so it may be worth checking whether better options are available after the first year.
While news of increases is welcome, stubbornly high inflation is still eroding any real returns on savers’ cash. Inflation, as measured by the Consumer Prices Index (CPI), hit 9.9% in the 12 months to August – which was over 14 times more than the average easy access savings rate over the same period, according to research from investment platform interactive investor.
Any delay between the latest hike and increase in savings rates will further widen the gap between inflation and returns.
Becky O’Connor, head of pensions and savings at interactive investor, said if the rise in the Bank rate is passed on to savers and has the effect of bringing down inflation, cash savings could, once again, start to look attractive: “This could be especially welcomed by older people, who often have more built up in savings, and also often prefer the lower risk of cash compared to the stock market for their life savings.
“People with savings have had years of low returns and this latest rate rise, which is significant, could really turn the tables back in their favour.”
21 September: Competitive Offers Prompt Increase In Guaranteed Rates
Savers are turning to fixed-term savings accounts to lock in increasingly competitive rates.
Investment platform Hargreaves Lansdown reported a 40% uptick in the number of new fixed-term deposits it has received over the last 12 months.
Fixed-term savings accounts offer guaranteed interest rates for a set period in exchange for forfeiting access to your cash.
Tom Higham, acting head of savings at Hargreaves Lansdown, said: “We’re seeing considerably more clients using fixed term deposits over easy access. Up to 80% of all new flows are heading into fixed term deposits, up from around 50% a year ago.
“People are cashing on fixed terms because the rates are higher than they’ve been for a decade or more.”
At 1.75%, the Bank of England Bank Rate currently stands at a 14-year high. Bank rate is expected to rise further tomorrow (September 22) when members of decision-making Monetary Policy (MPC) hold their next meeting.
Mr Higham expects banks and building societies to continue passing on increases in Bank rate to savings accounts.
However, he added that savers are only looking to fix in their cash for a maximum period of two years as they are anticipating interest rates to continue to rise until inflation starts to fall.
25 August: NS&I Pays 3% AER On Latest Green Bond Issue
National Savings & Investments, the government backed savings institution, has launched the third issue of its Green Savings Bond, which will pay interest at 3% a year for a three-year fixed term.
Higher rates are available for this length of fix – JN Bank is paying 3.45%, for example – but the NS&I bond guarantees that deposits will be used to help finance green initiatives as part of the UK Government Green Financing Framework.
This will include projects to tackle climate change, improve sustainability and increase renewable energy capacity.
Interest at 3% AER over three years on a £10,000 deposit would yield a profit of around £930. Deposits are permitted in the range £1,000 to £100,000 but it is important to remember that the money cannot be accessed during the term.
Customers need to be 16 or over to purchase the Bonds from NS&I.
The new rate compares to the 1.30% paid on the second tranche of Green bonds issued in February.
NS&I announced increased rates across its fleet of savings products in July after increasing the Premium Bonds prize fund in June.
The organisation contributed £1.3 billion to government coffers in the first quarter of the financial year 2022/23. All savings and investments lodged with NS&I benefit from a 100% government guarantee.
Its products rarely have market-beating rates so as not to unfairly disrupt competition in the commercial market.
24 August: One-In-Three Adults Have No Access To ‘Rainy Day’ Cash
More than half of UK adults are set to use money put aside for an emergency because of the worsening cost-of-living crisis, writes Andrew Michael.
Research from wealth manager Charles Stanley shows that nearly three-quarters of adult Brits (71%) have a ‘rainy day’ fund that would last the average saver just shy of five months.
But due to the challenging economic climate, more than half of respondents (54%) told the company they are worried about using up their emergency savings, leaving them unprepared for any future financial crises.
Charles Stanley found the average emergency fund would last its owner four months and three weeks. Just over a quarter of people (28%) said their reserves would cover them for between two weeks and two months, while 10% said they would run out of money after a fortnight.
Of those with emergency savings, a quarter (25%) of respondents said they have never needed it, while just under one-in-10 (9%) said they dip into it less than once a year.
One-in-eight people (12%) said they have never further topped up their reserves, although more than a third (36%) claimed they added monthly amounts to their savings. One-in-10 (10%) of respondents said they topped up their emergency stash on a weekly basis.
Charles Stanley said nearly one-in-three individuals (29%) do not have a reserve fund. Nearly two-fifths of workers (38%) earning less than £20,000 a year said they do not have a reserve fund. This proportion fell to just over a quarter (28%) of employees paid between £20,000 and £30,000 and reduced further for those earning commensurately higher amounts.
About a quarter of workers in employment said they did not have an emergency fund, while this figure rose to 46% of the job-seeking unemployed.
Lisa Caplan, director of OneStep Financial Planning at Charles Stanley, said: “Saving into a rainy day pot is not always people’s first priority, but those who have managed to prepare will be grateful for it during the cost-of-living crisis.
“As ever though, we are seeing common themes when we look at who slips through the net. The picture is less positive for women, low-earners, and those looking for work.”
23 August: Building Society Passes On Latest 0.5% Rate Hike
Nationwide Building Society has announced it will raise interest rates on all variable rate savings accounts from 1 September 2022.
These accounts are seeing interest rates rise by 0.50%, in line with the latest bank rate increase:
- Flex Regular Saver rate rises to 3.00% AER
- Start to Save 2 rate rises to 3.00% AER
- Future Saver rate rises to 2.00% AER
- Junior ISA rate rises to 2.00% AER
- Child Trust Fund rate rises to 2.00% AER
- Smart Limited Access rate rises to 1.50% AER
- Flex Instant Saver rate rises to 1.00% AER
The 1 Year Triple Access Online Saver will offer a new rate of 1.75% AER for the next 12 months, while the 1 Year Triple Access Online ISA rate is set to rise to 1.50% AER.
Nationwide’s Flex Saver and Flex ISA accounts will see the largest increase of 0.55%, taking rates to either 0.65%, 0.70%, or 0.75% AER depending on the account balance.
The Help to Buy ISA will undergo a slightly more modest rate increase of 0.40% to 1.75% AER. The Loyalty Saver, Loyalty ISA and Loyalty Single Access ISA accounts will see rates rise by 0.35% to 1.60% AER.
Rates on Nationwide’s easy access accounts — the Instant Access Saver, Instant ISA Saver and Cashbuilder — are set to rise by 0.15% to either 0.25%, 0.30% or 0.35% AER depending on the account balance.
Tom Riley, director of banking and savings at Nationwide, said: “As a mutual we are always keen to support savers and pay the best rates we can sustainably afford, which is why we are increasing rates on all variable rate accounts, particularly regular savers, loyalty and children’s accounts as well as our popular Triple Access Accounts.”
Banks generally have been criticised in recent weeks for not passing on rate increases to their customers following increases in the Bank of England bank rate, which now stands at 1.75%.
There is speculation that the rate could rise to 2.25% when the Bank next announces its new level on 15 September – an increase that would heap more pressure on institutions to pay more to savers.
5 August: Bank Rate Rises – But Savers Still Battle Inflation
The Bank of England’s recent hike in interest rates from 1.25% to 1.75% will be welcome news to debt-free savers who have been battling against historically-low interest rates for well over a decade.
However, with inflation currently at a 40-year high of 9.4% – eroding the value of savings faster than at any time in the past four decades – it becomes especially important to shop around for the best deals, even if savings providers pass on the full rate increase.
Sarah Pennells, consumer finance specialist at Royal London said: “[Savers] will be encouraged that savings rates, if passed on fully, will see rates come out of the doldrums.
“But banks and building societies don’t necessarily raise interest rates on all their savings products and may not increase them by the same amount, so it’s worth waiting a few weeks before checking comparison websites and best-buy tables to see if you can get a better interest rate.”
Kevin Brown, savings specialist at Scottish Friendly, said: “Anyone still able to save should be encouraged to do so as rates are likely to rise. But be aware that if the gap to inflation widens, returns in real terms will continue to fall.”
He added: “The best way to combat that may be to consider investing some of your money”.
Newcastle Building Society has already announced it will pass on the full rate increase to ‘99% of its customers’, while Coventry Building Society has committed to increasing its savings rates from 1 September.
The latest 0.5 percentage point increase marks the biggest single leap the BoE has implemented since 1995, and takes the Bank rate to its highest level in 14 years.
21 July: NS&I Boosts Rates To Deliver Competitive Offer
National Savings & Investments (NS&I) has increased interest rates across a swathe of products to bring them into line with competitor offerings.
The interest rate paid on Direct Saver, Income Bonds, Direct ISA and Junior ISA, will increase from today (21 July 2022).
The interest rate paid on Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates will increase from 1 August 2022. These products are not currently on sale, so the new rates are only available to existing customers.
More than 1.3 million people will see a boost to their savings as a result of the increases.
The rate on the Direct Saver and Income Bonds products will more than double from 0.50% to 1.20%, the Direct ISA from 0.35% to 0.90%, and the Junior ISA from 1.50% to 2.20%.
More substantial increases are taking place on guaranteed and fixed interest products. For example, three-year Guaranteed Income Bonds are increasing from 0.36% to 2.50%.
Details of the changes can be found here.
Earlier this year NS&I increased the Premium Bonds prize fund, which improved the odds of winning from 34,500 to 1 to 24,500 to 1 and saw an additional 1.4 million prizes paid out in June.
11 July: Cost-Of-Living Crisis Bites Into Savers’ Lockdown Gains
Financial gains made by UK savers during lockdowns imposed on them by the Covid-19 pandemic have been slashed back as a result of the ongoing cost-of-living crisis and need to meet rising prices, according to wealth manager Quilter.
Research carried out on behalf of the company found that just over half (53%) of the nation set aside money in savings and investments during the spate of coronavirus lockdowns that were imposed on the country during 2020 and 2021.
Quilter said that baby boomers – those born between 1946 and 1964 – were most likely to have saved money during pandemic-enforced lockdowns. Of this cohort, well over half (59%) said they were yet to dip into those funds.
In contrast, the wealth manager found that around one-in-seven (15%) of those who had saved money during lockdowns had already spent the cash they had put to one side.
In addition, more than a third of people (39%) told Quilter that they had already made a significant dent in their savings, with many spending up to three-quarters of the money they had squirreled away.
Quilter added that nearly half (46%) of Brits with lockdown savings had needed to dip into their money in the second quarter of this year. This was a significant increase compared with the first three months of 2022, thanks mainly to rising food costs followed closely by soaring fuel prices.
Ian Browne, financial planning expert at Quilter said: “While many people were able to save during the lockdowns and have had those funds to fall back on during the cost-of-living crisis, almost half were unable to save in the first place and could be left in a financially vulnerable position.”
“Even those who were able to put some money aside have seen their savings rapidly swallowed up by rising costs, particularly on day-to-day bills such as food, car fuel and heating and electricity.”
16 June: Take Advantage Of Bank Rate Hike, Savers Told
Financial experts have urged savers to take advantage of today’s decision by the Bank of England (BoE) to raise the Bank Rate by a quarter of a percentage point.
As expected, the BoE hiked interest rates from 1% to 1.25% which means bad news for mortgage customers on variable rate deals, but offers a glimmer of hope to savers looking to make maximum use of their money held on deposit.
With the latest data showing that consumer prices rose by 9% in the year to April, finding the highest-possible rate is vital for savers if they want to partly offset high inflation levels.
Alice Haine, personal finance analyst at the investment platform Bestinvest, said: “For cash savers, an interest rate rise is always a good thing, as they can secure higher rates on their savings pots – that is of course if they have spare cash to save in the first place.
“Saving rates have been creeping up to the highest levels seen in a decade, with some accounts now offering up to 1.56% for easy access accounts and up to 3% for fixed-rate products.
“Every penny in additional interest is a bonus when high inflation is eating away at the purchasing power of incomes. With many households dipping into emergency pots to meet rising food, fuel and energy bills, you need to make sure your money is working as hard as it can.”
Myron Jobson, senior personal finance analyst at interactive investor, said: “Higher rates mean savings will earn more – although some banks and building societies have been fiendishly slow in passing on recent hikes to the base rate.
“With the rate of inflation now higher than the best savings deal in the market, any money in savings loses purchasing power over time – but it still pays to pick the most competitive account.”
Les Cameron, financial expert at M&G Wealth, said: “While today’s announcement is no surprise, what remains to be seen is whether this rise will translate to higher rates available to savers or to increased borrowing costs.
“Reviewing your finances to make sure you’re prepared for the future has never been more important and, for many, that will involve seeking some form of professional financial advice.”
15 June: UK Savers Rely On Savings In Summer
UK consumers are more likely to dip into their savings in August than in any other month of the year, according to Atom Bank.
The research, which analysed customer savings habits between May 2020 and April 2022, also found that the 1st is the most popular day of each month to make a savings withdrawal.
Since going on holiday was the ‘top savings goal’ among Atom customers, it is likely that many August savings withdrawals are being put towards topping up travel expenses.
Aileen Robertson, head of savings at the bank, said: “A common mistake people make when saving for a holiday is not accounting for enough spending money, which may result in unexpected additional expenses while you’re away.
“It’s useful to plan ahead — research which excursions you might want to take and how much on average they cost, factor in transport costs for the whole trip and consider what you’re likely to spend on food and drink.”
However, in the midst of the ongoing cost-of-living crisis, many others are likely to be using savings to make ends meet.
Ms Robertson said: “Many people with good intentions to save are likely feeling worse off right now, and tapping into savings may be seen as the only way to beat the current cost of living squeeze.”
The bank also found that savers tended to withdraw relatively small amounts, with 25% of customers taking out £80 or less.
8 June: 50,000 Lifetime ISA Holders Use Funds To Buy First Home
Sales of stocks and shares individual savings accounts (ISAs) surged during the pandemic, in stark contrast to cash ISAs, which saw their popularity plummet over the same period, according to the latest figures from HM Revenue & Customs (HMRC).
ISAs are tax-efficient wrappers that enable holders to shelter a certain amount of money each year – currently £20,000 – from income tax, dividend tax and capital gains tax.
HMRC says investors opened nearly 3.6 million stocks and shares ISAs during the 2020/21 tax year, a period that coincided with the most disruptive period of the Covid-19 pandemic.
This is an increase of around 860,000 accounts compared with the previous tax year, representing an extra £10 billion in investments year-on-year.
HMRC says the number of cash ISAs opened during 2020/21 fell by 1.6 million to just over 8 million. This meant that the share of cash ISAs as a proportion of the overall number of ISAs sold fell from 75% in the tax year 2019/20 to 66% in 2020/21.
Overall, around 12 million ISAs were taken out during the tax year 2020/21 equating to around £72 billion in cash terms. This compares with the 13 million accounts taken out in the previous tax year.
HMRC figures also reveal that 50,800 people made withdrawals from their Lifetime ISA (LISA) to buy a home in 2020/21, an increase of 15,000 on the previous tax year.
LISAs allow people over 18 and under 40 to save, tax-free, for their first home or to supplement their retirement earnings. HMRC says that the average LISA withdrawal was £13,192 in 2020/21, a £700 increase on the previous year.
Bestinvest’s Adrian Lowery says the figures show how households channelled lockdown savings towards investing: “During the pandemic savings boom many households looked towards investments, rather than cash savings, with the Bank of England having slashed interest rates to an all-time low of 0.10% in March 2020.”
24 May: NS&I Adds £40 Million To Premium Bonds Prize Fund
National Savings and Investment (NS&I), the Government-backed bank responsible for Premium Bonds, has announced an increase to its prize fund rate from 1.00% to 1.40%, with effect from next month.
It will mean an additional 1.4 million prizes will be issued in June’s monthly draw out of an increased prize pot worth £40 million.
The majority of these extra prizes will be valued at £25 or £50, but the number of higher value prizes is also increasing. For example, there will be 98 prizes of £10,000 in each monthly draw from June, compared with the current 58, and 40 prizes of £25,000 compared to the current 24.
The odds of each £1 Premium Bond number winning a Premium Bonds prize will also change from 34,500 to 1 to 24,500 to 1.
Ian Ackerley, chief executive of NS&I said: “The new prize fund rate ensures that Premium Bonds are priced appropriately when compared to the interest rates offered by our competitors.
“It also ensures that we continue to balance the interests of savers, taxpayers and the broader financial services sector.
Premium Bonds, which are held by over 21 million people in the UK, were first introduced in 1956 as an alternative way to invest money. Rather than earning interest every month like regular savings accounts, purchasing a Premium Bond means being entered into a monthly prize draw for cash sums.
These sums range in value from £25 to £1 million, which winners receive tax-free. Every £1 invested in Premium Bonds is equivalent to one entry into the prize draw, but the minimum investment level is £25. Savers can cash out a portion or all of their bonds at any time.
Although investors do not earn monthly interest, the total value of the prize fund increases at a fixed rate, which is occasionally adjusted in line with inflation and interest rates, both of which have been climbing.
11 May: More Than Half Of UK Adults Open Bank Accounts Without Checking Interest Rates
More than half (52%) of adults in the UK have opened a bank account without checking the rate of interest it pays, according to a survey by the savings platform, Raisin.
Little interest in rates
It found that while almost half of all adults do not have a savings account, of those who do, more than a third have never checked interest rates elsewhere to see if they could be getting a better deal.
The survey, which asked 2,000 adults about their banking habits, revealed that ease of access to their cash was more important to savers than interest rates.
Of the respondents with a current account, savings account, or ISA, just 25% said they opened it because of the interest rate.
By comparison, 37% opened their account because it was offered by their current provider through online banking. And with 23% of women and 25% of men using online banking daily according to the survey, savings offers are viewed by a significant number of customers.
Branch versus digital banking
Despite the popularity of online banking, Raisin’s survey found traditional banks and building societies — with physical branches — remain more popular than their digital counterparts.
Nationwide was the most popular, with 57% of customers responding that they liked the provider. It was followed by Halifax which was liked by 51% of customers.
The Raisin survey also revealed that, once UK savers have decided on a bank, they regularly stick with it for years. More than a third (35%) of respondents said they have the same bank account they opened with their parents as a child. People aged under 35 and under are even less likely to have changed banks, with 50% of them retaining the account opened with their parents.
Since banks and building societies often entice new customers with high initial interest rates and even cash bonuses, sticking with the same bank for years is unlikely to net you the best deal.
With the UK in the grips of record inflation and the cost-of-living crisis, finding the most competitive savings accounts is particularly pressing.
Commenting on the research Kevin Mountford, Raisin’s co-founder, said: “The market is incredibly competitive thanks to online and challenger banks vying for your money, [so] do your research to find the best deals and rates — making smarter moves with your money now could help you save a lot more in the long run.”
29 April: Coventry BS Launches Fixed Rate ISA Range
Coventry Building Society has today launched four fixed rate ISAs. The UK’s second largest building society is offering:
- ISA paying 1.50% until 30 September 2023
- ISA paying 1.75% until 20 September 2024
- ISA paying 1.85% until 30 September 2025
- ISA paying 2.00% until 30 September 2026
The four new products join Coventry’s existing Children’s, Additional Allowance, and Easy Access ISAs.
Tom Riley, director of banking and savings at Nationwide Building Society, said: “Many people will be searching for the best rates they can find, suiting their individual saving needs with the peace of mind that a fixed rate provides, so we expect these new ISA products will be very popular.
“ISAs are still an attractive option for those savers wanting to earn interest tax-free that doesn’t count towards their personal savings allowances.”
The Coventry rates stand up well against other providers, including Aldermore, which offers a one year fixed rate ISA paying 1.46% AER, and Skipton Building Society, which offers 2.00% AER on its three year Online Fixed Rate Cash ISA.
Nationwide Building Society is also increasing some of its ISA interest rates, including its Single Access ISA, by up to 0.25% from 1 May 2022.
14 April: Mistaken Savers Think Inflation Leaves Them Better Off
Nearly one-in-nine (13%) cash ISA savers believe that inflation will leave them better off, according to research from Legal & General (L&G). More than half (52%) do not know what impact inflation will have on the real value of their savings over time.
ISA stands for ‘individual savings account’, a tax-efficient financial product supported by the UK government.
UK inflation climbed to 7% earlier this week, its highest level for 30 years. Inflation has risen sharply in recent months due to a number of reasons, including, the worldwide economy waking up after the pandemic, a spike in global energy prices and the Russian invasion of Ukraine.
Despite this, and with inflation predicted to soar even higher later this year, L&G’s research suggested that a large number of Britons could be in for a financial shock.
L&G said that there was £136 billion sitting in cash ISA accounts paying an average interest rate of 0.26%. But it added that two-thirds (64%) of cash ISA savers have taken no action on their savings, even though the return on cash was being far outstripped by the rate of inflation.
The company calculated that a £1,000 deposit with an interest rate of 0.26% would effectively reduce in value by £243 over five years assuming inflation stayed at 6% over that period.
Emma Byron, managing director at L&G Retirement Solutions, said: “Inflation is at its highest rate for three decades and it’s worrying that savers don’t realise that it’s eating away at millions of pounds sitting in low-interest paying accounts. Understanding the impact of inflation is crucial to understand how much money you have in real terms.
“While it is essential to keep some cash in the bank for an emergency fund, savers might want to consider other options to make their money work harder.”
29 March: JP Morgan’s Chase Offers 1.5% Savings Account
Chase, JP Morgan’s new digital bank, has unveiled a savings account for UK customers paying interest at twice the level of the Bank of England (BoE) Bank rate.
The Chase saver account is linked to the provider’s own current account and offers a competitive interest rate of 1.5% AER.
AER, or Annual Equivalent Rate, is the official method of calculating and showing the interest rate for savings accounts and is designed to allow easy comparisons across similar products.
Earlier this month, in a bid to stave off steepling UK inflation, the BoE raised its Bank rate from 0.5% to 0.75%, the third rise in four months.
The JP Morgan saver account is available to new and existing Chase current account holders and can be opened via the company’s app.
Chase said savers can deposit up to £250,000 in total at any time and can access their savings whenever they want, penalty-free and without loss of interest. There is no minimum opening balance.
Research from Chase found that UK consumers are looking for ways to segment their cash in order to better save for specific goals. Customers can open multiple Chase saver accounts to achieve this, each with a personalised name and featuring a unique account number.
The UK’s personal savings allowance (PSA), introduced in 2016, allows basic-rate (20%) taxpayers to earn £1,000 in savings interest tax-free, while higher-rate (40%) taxpayers are allowed to earn up to £500 before tax. Additional-rate (45%) payers receive no allowance.
A basic-rate taxpayer would be able to deposit just under £70,000 in the new Chase saver account without any tax liability at the product’s present rate. A higher-rate taxpayer could have around £34,000 on deposit with the account and not bust the £500 tax-free interest limit.
Shaun Port, Chase’s UK managing director for savings and investments, said: “With the cost of living increasing, we know that consumers want to maximise the interest they can earn with the reassurance of being able to access their savings instantly. We have designed the Chase saver account to provide our customers with maximum flexibility alongside a competitive rate.”
The UK’s Financial Services Compensation Scheme is a financial lifeboat arrangement that protects customers holding up to £85,000 across all accounts held within the umbrella of one banking group.
24 March: Monument Launches Trio Of Savings Accounts
New digital bank Monument has launched a trio of fixed-term savings products which, it claims, pay competitive rates of interest.
Accessible via its app, Monument’s 12-month, fixed-term savings account pays an annual equivalent rate (AER) of 1.80%. AER is the official rate for savings accounts and is designed to allow easy comparisons across similar products.
A two-year version of the account pays 2.05% AER, while Monument’s five-year, fixed-term product features an AER of 2.40%.
Depositors must be 18 over and resident in the UK. Customers are required to hold a minimum balance of £25,000 at any time across Monument savings accounts to qualify for the published rates.
Should they change their mind, customers can cancel an account within 14 days of opening one. Once up and running, however, withdrawals are not permitted.
Monument, which describes itself as the “first neo-bank launched in the UK specifically to meet the unmet demands of mass affluent clients”, received its banking licence last year.
John Saunders, Monument’s chief commercial officer said: “We’re pleased to be offering a range of savings choices to consider, all at competitive rates. Inflation is a real and growing feature of personal finance, so leaving savings in low, or no, interest-bearing accounts makes less sense than ever.”
1 March: Study reveals regional differences in UK saving habits
One in four people in the UK do not have enough cash for emergencies, according to investment platform Hargreaves Lansdown (HL).
The firm defines emergency cash as savings equivalent to at least three months’ worth of essential expenses.
Figures from its Savings & Resilience Barometer, a financial measure put together with consultants Oxford Economics, showed a wide regional disparity in UK savings habits at the start of 2022.
HL identified the North of England, Midlands, Devon and Wales as among 10 so-called ‘notspots’, or regions that featured large shortfalls for cash savings.
According to HL, more than a third (36%) of those in the West Midlands and Tees Valley and Durham reported that they don’t have enough cash set aside in savings.
The same scenario was also reported by a third of people (33%) in Northumberland, Tyne and Wear, Derbyshire, Nottinghamshire, Devon and West Wales.
This contrasted with parts of London and the Home Counties, including Hertfordshire and Bedfordshire, that HL dubbed as savings ‘hotspots’, where more than four in five people claimed they have sufficient amounts of emergency cash.
HL’s Sarah Coles said: “There’s a mountain to climb to level up financial resilience across the UK. The report shows a gulf between areas with plenty of savings and those with huge shortfalls. It’s not simply a North/South divide.”
Separately, financial coaching app Claro Money says more than a quarter (28%) of Brits are relying on nest-eggs to make good shortfalls when outgoings exceed their income, rather than using their savings for aspirational goals such as buying a car or taking a luxury holiday.
Sarah Brill at Claro Money said: “Savings are being called upon to meet the daily cost of living with inflation increases at a 30-year high. Previously, spending habits might have seen Brits save to spend on rewarding big ticket items, but it’s now the mounting cost of living that is nibbling away at Brits’ hard-earned savings.”
15 February: NS&I Doubles Green Savings Bond Rate
Government-backed National Savings & Investments has issued a second tranche of its green savings bond paying 1.3% over a three-year fixed term – twice the amount paid on the first issue of the bond at launch last October.
Someone buying £1,000 of the new bonds, which enable savers to put their money behind initiatives such as renewable energy and cleaner transport, will receive £1,039 at maturity.
Leading three-year bonds on offer from financial institutions are paying around 1.8%.
The latest issue has a minimum initial deposit of £100 and the maximum investment is £100,000 per person. As NS&I is backed by the UK Treasury, 100% of savers’ money is safe. Applicants need to be at least 16.
Savings with other providers are protected up to £85,000 per person under the Financial Services Compensation Scheme.
Once an initial deposit has been made, a 30-day cooling off period gives savers the opportunity to withdraw their cash. After that, savers are prevented from accessing their money until the bond reaches the end of its term.
Sarah Coles at Hargreaves Lansdown says NS&I’s decision to double the green bond’s interest rate is “a dramatic step that shows the old rate was a real disappointment”.
She says the higher rate “may be enough to see the bond flourish”.
Becky O’Connor at online platform interactive investor, says: “While this rate is not top of the best-buys for three-year bonds, which are currently around 1.8%, it is far more compelling than before for those wanting their money to be put to productive use in the UK’s growing low carbon economy, at no risk.”
10 February: NS&I Ups Rates On Direct Saver And Income Bond Accounts
NS&I, the government-backed savings provider, is raising the interest rates on its Direct Saver and Income Bond products to 0.5% gross Annual Equivalent Rate (AER) from today (10 February).
The increase in each case of 0.15 percentage points follows a rise from 0.15% to 0.35% last December. Last week, the Bank of England raised its official Bank rate to 0.5%, its second increase in three months.
The Direct Saver account can be opened with a minimum deposit of £1 with an upper limit of £2 million, while the Income Bond has a minimum investment of £500 and a maximum of £1 million.
Ian Ackerley, NS&I chief executive, said: “The new interest rates will ensure our products are priced in line with the broader savings sector.”
Helen Morrissey at financial advisor Hargreaves Lansdown said: “It is hugely positive to see NS&I boosting rates on these products, but they still remain some way off meeting the best rates available on the market.
“The best easy-access savings rate available is currently 0.71%, so savvy savers willing to shop around can still find better places to stash their cash.”
8 February: Easy-Access Products Dominate 2021 Savings Market
UK savers chose to squirrel away their money in easy-access accounts last year over fixed-rate products or Individual Savings Accounts (ISAs), according to Aldermore Bank.
Analysis by Aldermore of the latest Bank of England Money and Credit data showed that UK personal savings stood at £1.414 trillion in December 2021, a year-on-year increase of 6.5%, or £86 billion.
Aldermore attributed the rise to a continuation of the savings habits that Brits picked up during the 2020 lockdown when the pandemic was at its height. The figure excludes cash held in current accounts and NS&I products such as Premium Bonds.
The bank said the easy-access element of the savings market attracted an additional £99 billion in 2021, an increase of 11.3% year-on-year. The main advantage of easy-access accounts is that they allow savers to withdraw cash as and when they please.
In contrast, Aldermore said that the amount in fixed-rate savings products at the end of 2021 was £9 billion down on the previous year, a drop of 5.7%.
The research also showed that savers deposited £4 billion less in savings-based ISAs by the end of last year compared with 12 months earlier, with the attraction of tax-free benefits from these products failing to offset the depressed interest rates on offer.
Ewan Edwards, savings director at Aldermore Bank, said: “The value of savings cannot be underestimated. It’s very encouraging that the focus on savings we saw in 2020 has continued on and grown further in 2021 as people remain focused on building their financial wealth.”
Average Savings On The Rise
Separate research from Paragon Bank backed up the trend towards greater savings habits. According to the bank, the average non-ISA easy-access balance grew from £10,246 in March 2020 to £12,106 in October 2021.
But Paragon warned that most of these accounts continue to earn a very low interest rate, with 71% of easy-access balances offering an interest rate of 0.1% or less.
The bank added that the number of easy-access, non-ISA accounts with balances of £100,000 or more now makes up a record 2% of all accounts in this sector. This is up from 1.8% in October 2020 and 1.6% in October 2019.
Derek Sprawling, savings director at Paragon Bank, said: “The dominant trend we are noting in the easy-access space is that seven out of 10 savers continue to receive a really low return on their money.
“This is despite rates picking up across the board and best-buy deals offering people the opportunity to earn at least six times more interest than they currently are in a low-paying account.”
