The coronavirus (COVID-19) pandemic has seen the UK join a number of countries in a lockdown, with Prime Minister Boris Johnson having announced stringent measures to slow the spread of the virus on March 23. As well as the devastating consequences in terms of health, the crisis is having a financial impact too, and today Martin Lewis issued a savings update.
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Last month, the UK base rate was cut to 0.1 percent following two successive reductions by the Bank of England (BoE).
The emergency measures has taken the Bank Rate to a historic low, with the move having an impact on savers.
The consequences are something which Martin Lewis addressed this week, in his weekly MoneySavingExpert.com Money Tips email.
Remarking on the “good, the bad and the ugly of the UK savings market,” the update pointed out that in March alone, 180 savings accounts were withdrawn from the market.
Addressing the changes on savings accounts, Money Saving Expert said: “This means everyone should CHECK NOW what they earn [in interest].”
Highlighting some good news, Mr Lewis has this week commented on NS&I cancelled planned cuts to interest rates, which was to have a knock-on effect on the odds of winning in the Premium Bonds prize draw.
The changes, which were set to come into effect from May 2020, had been intended to see the Premium Bonds interest rate drop by 10 basis points, from 1.4 percent to 1.3 percent.
Mr Lewis said on the topic: “Even at 1.4 percent tax-free, the Premium Bond prize fund rate isn’t a no-brainer.
“While NS&I is a bastion of savings safety, unless you’ve £85,000+ saved, the protection isn’t materially better than the normal UK safe savings cover.
“Nor is ‘tax-free’ a boost for most. Since 2016, the personal savings allowance means basic 20 percent rate taxpayers can earn £1,000/yr interest in any savings tax-free (higher 40 percent rate, £500). So fewer than one in 20 people have enough saved to pay tax on it.
“Compare rates, and while 1.4 percent beats the top easy access, it loses to the top one year fix, and most people do park cash in Premium Bonds for more than that.
“Yet even then, the Premium Bond prize fund rate isn’t the same as an interest rate. Put £1,000 in for a year and you won’t get £14 back, you can’t; the smallest prize is £25.
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“In fact, statistically with £1,000, most win nowt, just less than half win £25 and a trivial number win more.”
Elsewhere, Mr Lewis pointed out the “bad news” – that top easy-access rates have reduced to 1.2 percent.
“For those earning less, it’s a good idea to ditch and switch, or see how you can get up to 1.6 percent if you lock you cash away,” he said.
So, what is the current top easy-access savings account?
According to Money Saving Expert, Marcus and Saga pay 1.2 percent AER (min deposit £1), which is down from 1.3 percent last week.
For those looking to lock their cash away in return for a better interest rates, they may be interested to hear that it’s possible to earn 1.6 percent with a fixed account.
The Money Saving Expert flagged that the top payer for a one-year fix is Vanquis Bank at 1.6 percent AER (minimum £1,000).
But, it’s important to be aware that this account offers no access unless the saver can prove financial difficulty.
Alternatively, Saga and Marcus pay 1.45 percent AER (minimum £1).
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