Money Saving Expert Martin Lewis says anybody who has savings in the bank needs to take action, as easy-access rates drop to new lows and NS&I gets ready to slash payments to almost nothing at all.
The finance journalist says its the worst time for savers in two decades, after NS&I announced its decision to slash some of its main savings rates from 1.16% to just 0.01%.
Writing in the weekly Martin wrote in his weekly MoneySavingExpert.com newsletter, he said: “I’ve been the Money Saving Expert for 20yrs (I know, thanks, I look younger) and can’t think of a worse time for savers.
“The market’s top easy-access rate’s just 0.75%. I’d once have shrieked ‘ditch & switch’ at such paltry fare.”
But that doesn’t mean you should just give up – and Martin had a four-point plan to make sure you still get the best value you can, reports the Mirror.
“Here’s how to fight for every scrap of interest,” he wrote.
1. Overpay debts where possible
“Overpaying often beats saving,” Martin explained.
“If the interest you’re charged for debt is higher than what you earn on savings, clearing the debt pays.”
2. Move your money
“As a bare minimum, move savings to top easy-access accounts,” Martin said.
“Easy access means you can move money in and out when you want – so its top rate should be your lowest rate.”
He pointed out West Bromwich Building Society had the best rates right now at 0.75% AER.
“While the interest is low, it’s still 75 times what many other accounts pay,” he added.
For people with less put away, he added that Virgin Money pays 2% on its current account – but only for £1,000.
There’s an added perk too – with people switching to the current account getting 15 bottles of wine.
However, while you can move money when you like, rates on easy-access can change fast.
3. For certainty, lock your rate in with a bond
Martin described this as the “risk-averse bet”.
“Here, the rate and your money is locked in (ie, you can’t access it – so only put away what you definitely won’t need). That gives you surety, but if rates start to rise within the fixed term, you’ve lost the freedom to ditch ’em,” he said.
The top payer over one year it Tandem’s 1.05% AER fix (min £1,000).
4. Deals that pay 50% – for some
Standard savings products aren’t the only option, Martin said.
“There are specialist routes where some can earn more,” he explained.
These include a 50% savings bonus for low earners with the Help to Save scheme and a 25% boost on savings via a Lifetime ISA – as long as you use the money to buy a first home or wait until you are 60 to cash it in.
Regular savings accounts – where you put away set amount each month – give you up to to 3% he added.
And if you pay tax on savings (ie make more than £1,000 in interest a year as a basic rate taxpayer or £500 in interest a year as a higher-rate taxpayer) you should look to see if a cash ISA is more suitable.
The Premium Bonds prize fund works out at a 1% rate overall – and you can withdraw your money in 7 days if you need it – but it’s entirely dependent on luck how much you get (and it could well be £0).