The email pings into my laptop from an oh-so-helpful bank wanting me to “make sure your account is right for you.” Interest rates are being cut again next month and I have been sent a list of 19 new savings rates.
The accounts have encouraging names such as the Good for Life Isa but it will stop paying 0.5% and start paying a miserly quarter percent. My own eSaver is being cut from 0.6% to 0.35%.
These latest cuts come days after Ros Altmann, the former pensions minister, announced that we all need to save more for our old age. We do not only need to provide pension income for a longer life, but also enough money for social care in our last years.
Pennies in interest
How can our children be persuaded to save more for the future when thousands of pounds in a savings account earns just pennies in interest.
While rates are so low for savers not all borrowers are doing so well. Those who have moved to fixed rates may be smiling. But with the bank’s representative rate of interest on its credit cards at 18.9% and its standard variable mortgage about to be reduced to 4.49% now might be the time to use savings to pay off debts.
We used to expect to beat inflation with our savings rates. Now they don’t even beat the consumer prices index at 0.6% and definitely not the 1.8% retail prices index at the time of writing.
Fewer pounds worth less
Savings products that claim they will equal inflation are just standing still and will be risky. The falling pound means that inflation is likely to increase in coming months. Petrol prices are rising fast. Shame they did not come down quite so quickly when the oil price in dollars halved two years ago.
In the meantime the banks maintain their margins and encourage us to borrow.