Bank of England keeps interest rates at record low
The Bank of England kept interest rates at 0.5% last week, and marks the 3rd year that they have been at this level. Whilst those with a mortgage may be pleased, many of you are disappointed with the rate of return you will get on your cash savings.
Keeping enough money easily accessible on deposit is a high priority for your financial security and this should be one of the foundations of your personal financial plan.
If you do not have enough accessible cash then you may be forced to sell assets such as property, shares and bonds, at inopportune times. Doing so could cost you a lot more than had you kept enough back. The bottom line is to have adequate cash reserves to handle most, if not all, unforeseen circumstances that may arise. Banks or building societies remain the safest place to keep your cash in the short term.
Despite the downgrading of financial strength in many global banks your deposits will be guaranteed by the Government Financial Services Protection Scheme (FSCS) up to £85,000 per institution, per individual, and you should not be worried if your savings are below this level.
Deposit rates are historically low but you should not be getting 0.5% on your money! Remember to keep a close eye on the accounts you have as you may be surprised how rates on ‘old accounts’ can be reduced to make way for ‘new style’ accounts. We have given an indication of competitive deposit rate below.
Although you should be holding adequate reserves of cash, over longer periods of time historically the returns have not kept pace with inflation. Inflation has been falling over the last few months but is still significantly higher than the rate of interest you earn on most deposit accounts, so this money is effectively losing value each year.
At Old Mill we believe risk and return are related and in order to have the prospect of providing a return in excess of inflation over the longer term it is necessary to commit monies to assets such as property and equities.
You should consider how much you want to keep easily accessible, and how much you are prepared to invest. It is important to ensure your money is invested in a robust and consistent manner and our Portfolio Management Service takes into account your personal views towards risk when we tailor a portfolio for you.
If we can help with this please speak to your usual Old Mill contact.
Current interest rates:
Internet Account: 3.02% – minimum deposit £1,000 (Includes a bonus of 1.48% for first 12 months) (Nationwide)
No Notice Account: 2.80% (Internet, Telephone and Postal Account – Includes 0.89% bonus for 12 months) – minimum deposit £1,000 (Scottish Widows Bank)
Regular Saver Account: 4.00% – minimum monthly deposit £1 (Norwich&Peterborough)
Overs 50s Account: 2.75% (Internet or Telephone Account) – minimum deposit £1 (SAGA)
Childrens Account: 2.00% – minimum deposit £1 (Chelsea)
Cash ISA: 3.00% (Internet and Telephone Account) – Instant Access, minimum deposit £1 (ING Direct)
Source: Moneyfacts March 2012