Dec 07 2008
How do you cope with falling interest rates if you are a saver (UK)
The Bank of England slashed bank base rates last week, and while the banks hesitated to pass the cut to borrowers, all of them immediately slashed savings rates. On some instant access accounts, the saving rate is a pitiful 0.1%.
So what do you do if you are a saver? There is one institution left that will pay savers a good return. The government owned National Savings offers a variety of products, the best known of which are their two and five year tax-free bonds. They are, at the time of writing, offering 2 year and five year fixed rate bonds with a tax-free return of 2.95%, and two and five year tax free index-linked bonds with a return of 1% + RPI (retail price index). Given that the retail price index is currently 4.2%, this is a very good return indeed. You can invest with National Savings by going to your local Post Office, or by applying online. And because National Savings is owned by Her Majesty’s government, it’s the safest place to place your money.
