Savings accounts: 75% fail to give real returns
19/11/2009
Rebecca Sargent
Less than a quarter of savings accounts are offering interest rates high enough to stave off inflation, research from moneysupermarket.com has claimed.
Earlier this week, the rate of CPI inflation rose from 1.1 per cent to 1.5 per cent, meaning that basic rate taxpayers will need a savings account interest rate of at least 1.87 per cent to gain benefits in real terms, the rate required to make a difference increases to 2.5 per cent for higher rate taxpayers.
According to the research, it is easy access savings accounts that have been the hardest hit, as just 15 per cent pay a rate of 1.875 per cent or more.
Commenting, Kevin Mountford, head of banking at moneysupermarket.com said: "Regular savings accounts are looking more attractive at the moment, with over half of the products available set to give customers a real return on their cash.
"Cash ISAs are also offering good value for money at the moment but, in all, savers need to be wary that almost three quarters of products will fail to give a true return to savers."
Interest rates on savings accounts have been creeping down gradually, ever since the Bank of England slashed Base rate to 0.5 per cent back in March. Mr Mountford adds:
"We expected to see savings rates creep down before the end of the year, but if rates go any lower then savers will find it almost impossible to beat inflation.
"Anyone taking out a new deal should look for the highest return on terms that suit them, otherwise as the economy stabilises we might see inflation creep up even more and bite away at those interest rates.
"I would urge savers to be more attentive than ever to ensure they get the best return possible," he added.
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| 5 Year Fixed Term Deposit Account | 4.55% | |
| Interest can be paid Annually at 4.55% AER, Quarterly at 4.47% AER or Monthly at 4.45% AER. Minimum Deposit £10,000 |
| The Royal Deposit Plan | 4.00% | |
| 3 year fixed rate deposit plan that returns 4.00% a year. Minimum investment £3,600. |
| 18 Month Fixed Rate Bond | 3.00% | |
| 18 Month Fixed Rate - 3.00% AER. Open to new and existing customers. Click to learn more. |
| Santander 1 Year Fixed Rate Bond | Up to 2.75% | |
| Available to new and existing customers. Deposit over £1 and receive 2.50% AER, deposit over £10K to 2.75% AER |
| 1 Year Fixed Term Deposit Account | 2.00% | |
| Minimum Deposit £10,000. 1 year fixed rate bond available to new and existing customers. |
Only Available to Nationwide Flex-Account customers | Nationwide E Bond: 6 months | up to 2.25% | |
| Earn 2.25% AER on balances over £1. |
| Tesco Internet Saver | 2.75% | |
| The 2.75% rate shown includes a fixed 1.50% bonus for 12 months on balances up to £100,000. |
| Online Saver | 2.75% | |
| The 2.75% rate shown includes a fixed 2.25% bonus for at least 12 months. Open with a minimum deposit of £1,000. |
| Direct Transfer Account | 2.70% | |
| Includes a 0.69% bonus payment for the 1st 12 months giving you a return of 2.70% AER. Open from £1,000. |
| ING Direct Savings Account | 2.50% | |
| Rate guaranteed for 12 months from date account opened. Save from just £1. |
| e-Saver | 2.50% | |
| 2.50% includes a 12 month bonus of 2.00%. AER without bonus is 0.50% |
| Savings Account 2 | 2.50% | |
| 2.50% includes a 12 month bonus of 2.00%. AER without bonus rate is 0.50%. |
| Instant Saver | 2.10% | |
| 2.10% includes a 12 month bonus of 2.00%. AER without bonus is 0.10% |
| Lloyds TSB International Bonus Saver | 2.01% | |
| 2.01% includes a 12 month bonus of 0.50%. Rate without bonus is 1.50% |
Only Available to Nationwide Flex-Account customers | Nationwide E Savings Plus | 2.00% | |
| [No bonus] Available to Nationwide Flex Account holders only. Rate applies where 3 or fewer withdrawals are made each year. |
| Online Bonus Saver | 0.75% | |
| 0.75% including a 0.50% bonus on months where you don't make a withdrawal. Rate without bonus is 0.25%. |
| FTSE Income Plan - Conditional Income Option |  | 6.50% pa* | |
| 5 Year Structured Income Plan with offering an annual yield of 6.50% |
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| The Schroder Income Maximiser Fund ISA aims to deliver a target income yield of 7% pa, also providing potential capital growth. Income is paid quarterly. |
| Invesco Perpetual Corporate Bond ISA | | 6.23%*** | |
| This highly popular fund aims to achieve a high level of overall return with relative security to capital. Income Paid to you twice yearly. Up to 100% Discount off the Standard Initial Fund Charge. |
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| M&G Corporate Bond ISA | | 4.80%* | |
| The M&G Corporate Bond Fund is a conservative ‘blue chip’ sterling fund that aims to produce a higher return than UK government bonds. Income is Paid to you Quarterly. 100% Discount off the Standard Initial Fund Charge. |
| Invesco Perpetual High Income Fund ISA | | 4.69%** | |
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* Income payments are dependent upon the FTSE 100 Index.
† Guaranteed income payments.
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