October 27, 2009

Savings: in the UK and offshore

Filed under: News — Tags: saving, savings —

NS&I has raised savings rates this week in order to attract more savers, and already enters the top league tables on returns.

However, savings rates on most savings account services remain low due to the continued low rates set by the Bank of England.

Tax changes at HMRC mean that offshore saving faces the double whammy of low interest rates across the globe, coupled with complex tax accounting with any interest earned.

Still, at least it is encouraging to see some providers actively trying to encourage more savers to join with them. This is especially important as the savings ratio for the UK has increased to 5.6%, which means that more Britons are trying to save and invest their money.

The savings tables at Moneyfacts shows an interesting perspective, with building societies in general leading the way with savings rates for normal accounts, though interest does generally stay under 2%.

The really interesting part of the modern savings landscape, though, is that both banks and building societies are trying to lock savers into bond or fixed term accounts - ie, that instead of instant access or notice savings accounts, they are looking for guaranteed periods of investment where the money cannot be touched.

This has to be a disturbing development, though, because in the current landscape, savers really should be able to rely on competitive savings rates, and still have access to their money. Instead, they are being asked to put up with little access and little return.

While the hope is that the financial crisis is easing, the warning remains that the UK could still face a double dip recession, which would mean the savings market remaining muted well into the next decade.

Story link: Savings: in the UK and offshore