If you are looking to increase your savings this year, you’ll need to look beyond the high street.
According to new data from Smile bank, the average household will increase their savings by 35% to around £2,600 in 2009.
Unfortunately, our renewed passion for saving comes at a time when the reward for doing so is extremely low.
In fact, returns on savings have fallen by 75% in recent months as a result of the repeated base rate cuts.
High street banks the worst offenders
This means it is harder than ever to find a competitive savings account – and the high street banks certainly aren’t helping.
At best, their savings rates are below par, at worst they are insulting. Take a look at the following.
Barclays’ Active Savings account pays just 0.2% interest, while its e-Savings accounts up to 1.75% (falling to 0.85% in months you withdraw). At HSBC, the Flexible Saver account has a 0.15% rate, and its Online Bonus Saver pays 1.75% (0.75% when you make a withdrawal).
And they are by no means alone – most of the household name banks are truly stingy when it comes to savings accounts, relying on customer inertia and familiarity to bring in the funds.
Smaller institutions more competitive
Smaller banks and savings institutions can’t rest on their laurels, and instead have to rely on attractive rates to bring in the customers, making them an ideal destination for your hard-earned cash.
If you’re worried about the safety of your investments in these volatile times, remember that savings in all FSA regulated banks are guaranteed up to £50,000 by the financial services compensation scheme.
So what are your options?
If you are looking for a top instant access account, then the ICICI Hi Save savings account is a good bet, paying 3.5% on all deposits above £1 – far better than the 0.15%-0.2% offered by HSBC and Barclays.
Another option is the CitiBank Flexible Saver which also comes with a 3.5% rate, but features a hefty 1.91% AER bonus, meaning your rate will plummet to a paltry 1.6% after one year.
If you’re looking to lock your savings away, then you can’t beat the ICICI one year fixed rate savings account, which comes with a 3.9% rate on all deposits over £1,000.
If it’s a regular savings account you’re after, then Norwich & Peterborough pays an impressive 6% on its Family Regular Saver.
Good accounts are not extinct, just rare
As you can see, there are still a few decent savings accounts on the market despite the repeated cuts to the base rate.
The problem is they are slightly harder to find, so it’s important you take the time to shop around and compare rival offerings before making your decision.
Make sure you include the small guys in your search because, more often than not, they’ll give you a better rate than your high street bank.
