Personal finance guru, Martin Lewis, has issued a critical notice to anyone with funds in savings accounts following the Bank of England’s decision to keep interest rates static for the first occasion in almost two years. The committee responsible for monetary policy chose to maintain the benchmark rate, which determines how much households must pay to borrow money, at 5.25%.
While this situation is favourable for individuals with mortgages, the financial expert urgently addressed savers via social media following the announcement. His message indicates that those who wish to benefit from leading interest rates should make swift decisions, as these deals may start to decrease or vanish by the end of the day.
Martin posted to his X account (previously known as Twitter), addressing his following of over 2 million people: “URGENT SAVERS ANNOUNCEMENT (please share). The Bank of England just announced the maintenance of interest rates at 5.25%- contrary to many speculations of an increase. Therefore, it’s plausible that fixed rate savings may swiftly reduce their rates (these are based on long-term interest rate forecasts).”
He continued: “If so, and you’re considering locking in a fixed rate, it’s advisable to initiate a premier fixed deal immediately as the rates could plummet even by later today. If this does happen by later this week, you’ll definitely want to act soon.”
The founder of MoneySavingExpert.com (MSE.com) recommends taking immediate action by opening a fixed rate now, but not depositing any money. Martin added: “Best strategy for the situation: Open a fixed account today, but don’t fund it (you’ve usually 7 to 14 days to do that). Simply keep it open for future options, and wait to see what happens to rates. If they increase, simply don’t fund the account you’ve created now – there’s no problem with that.”
Earlier today, Nationwide Building Society introduced a Flex Regular Saver account, available only to current account customers, with an impressive 8% AER (annual equivalent rate) for 12 months – following a year, the account will convert to an instant access account.
The interest rate for the instant access account has not yet been announced by Nationwide. If four or more withdrawals are made from the Flex Regular Saver within a 12-month period from the account opening, the rate on the account will decrease to 2.15% AER.
Financial information website Moneyfacts reports that the last time an 8% rate was offered on a regular cash savings account was eight years ago – in 2013. The fixed-term regular saver was offered at a rate of 8% by First Direct.
Outstanding savings rates available this week
MoneySavingExpert.com (MSE.com) provides a convenient daily guide to the top available savings rates – find out more here. The best offers of the week are listed below, full details on MSE.com.
Best easy access savings
Outstanding notice savings
- RCI Bank – 5.6% for 95 days
Best fixed-term savings
- Hampshire Trust Bank – 5.6% for six months
- Secure Trust Bank – 5.85% for nine months
- NS&I – 6.2% for one year
- Ford Money – 6.05% for two years
- OakNorth Bank – 5.96% for three years
Key tips for maximising your savings
It’s crucial to regularly check the interest rate on your savings and shift your money to a higher-yield account if your current one isn’t generating satisfactory returns. The difference between the poorest and best-paying accounts can potentially equate to thousands of pounds each year on larger balances.
The Financial Services Compensation Scheme (FSCS) covers savings balances up to a limit of £85,000 per individual, per institution. Keep this in mind when deciding where to hold your savings.
Flexi-access drawdown permits individuals to directly take an income from their pension, meaning their savings can remain invested and potentially grow beyond what could be earned via interest on savings. Alternatively, moving a portion of the pension into a straightforward-to-access savings account can serve as an intermediate post for funds potentially required in the upcoming few years.
Be mindful that once the 25% tax-free lump sum is taken from a pension, any additional withdrawals are taxable at your marginal rate of income tax, even if deposited into a savings account or cash ISA.
The personal savings allowance offers basic rate taxpayers up to £1,000 in tax-free annual interest earnings, and for higher rate taxpayers, it’s £500 a year.
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Given the significant increase in interest rates, more savers, particularly the older demographic, might encounter a tax bill on their interest, unless they are held in an ISA, which is tax-free. You may also receive a ‘starting savings rate’ of up to £5,000 tax-free interest if your other income is below £17,570.
