Saving with traditional banks? Shopping around to challengers like Charter Savings Bank, Aldermore, Sainsbury’s or Virgin Money could help reduce risk while increasing your reward
People are saving more: according to last week's figures from the BBA, personal deposits grew 3.7 per cent in the year to January.
But at a time when the base rate is frozen at 0.5 per cent and looks set to remain at record low levels well into 2017, you could be forgiven for wondering why anyone would want to increase their cash holdings.
Generally, people are aware that keeping all of their cash in one savings account is not only a risky move – particularly if you’re fortunate enough to have large cash holdings in the bank, as the FSCS limit only protects deposits up to £75,000 – but, unless you move it regularly, it’s also a less lucrative one. The issue however, is inertia.
People simply don’t have the time to constantly be researching the best rates, moving money around and opening new savings account.
In our line of work we often come across individuals who tell us that they believe all banks offer roughly the same interest rates.
If you’re one of the 60 per cent of savers who banks with the big five and leaves cash languishing in a current account; or are one of the 87 per cent of savers who hasn’t switched savings product in the last three years; or worse still, don’t even know the interest rate you are being paid, that may well be the case.
A little bit of digging however, will reveal that even in this low-interest rate environment, there are some attractive alternatives available, you just need to know where to look and be willing to manage your cash a bit more effectively.
Charter Savings Bank for example is offering 1.76 per cent on its one year fixed rate account, whilst Aldermore is offering 1.5 per cent for the same period. If easy access is what you’re looking for, Sainsbury’s Bank is offering 1.35 per cent while Virgin Money is offering 1.31 per cent.
By all means, keep some of your cash with the big incumbent banks, but for risk (because of the £75,000 FSCS limit) and return purposes, consider spreading that cash across multiple accounts and like the high net-worth individuals who already use our platform, you could increase your interest income by two to five times per annum as a result.
Whether it’s thinking outside the box and looking to challenger banks, or broadening the search of the high street and more established banks, savers should note that better interest rates are there for the taking.