A bank expert has urged savers to make sure they are on the best rate as the Autumn Budget looms. There have been rumours Chancellor Rachel Reeves could make changes to policies around savings, such as by bringing in a new cap on ISA cash savings. Ahead of any changes, experts at savings provider Plum have urged people to shop around for a higher rate.
Rajan Lakhani, personal finance expert and head of money at savings app Plum, said: « It’s important for savers to shop around and make sure that their savings are working as hard as possible. Don’t assume your high street bank will give you a good deal, you have to do your research to find the highest interest rates. »
He said it’s good to go for a rate of at least 4 percent, with inflation currently just below this, at 3.6 percent. By having your savings in a rate above inflation, your money is at least growing by some amount in real terms. Mr Lakhani said: « Fintechs, building societies, and smaller providers are often able to be more flexible on rates and may even be offering special deals to help boost your savings. »
At the time of writing, you can get rates above 4 percent with many easy access savings accounts and ISAs, as well as with many fixed term accounts. Another option for savers is to diversify where they hold their cash by putting some of their funds into investing.
One concern for savers is that many interest rates are dipping, with the Bank of England reducing the base interest rate three times this year. The base rate is currently at 4 percent.
A recent Freedom of Information request of HMRC data by InvestEngine found there were only 1,530 cash ISAs with over £250,000 in them, while there are 244,570 stocks and shares ISAs with this amount or above saved up. Andrew Prosser, head of investments at InvestEngine, said: « As the Budget – and with it, potential ISA reform – approaches, the data obtained via FOI reveals a clear and growing divide between saving and investing.
« While cash ISAs will always have an important role, especially for shorter-term financial needs, the figures set out clearly the value of long-term investing, with the highest-value stocks and shares ISAs now worth 17 times that of the top cash ISAs on average. »
There have been suggestions the Chancellor is looking at a new cap on cash ISAs, to encourage people to try investing more. Mr Prosser said: « As the Chancellor looks set to adjust ISA rules to encourage more people to invest, it’s these kinds of numbers that truly help demonstrate the potential that investing holds.
« Alongside ISA reform, measures to improve financial education and increase its accessibility should also feature in the Budget. This approach has far greater potential to drive participation in investing than simply placing restrictions on savings and ultimately foster a better investment culture in the UK. »
