Martin Lewis advises pensioner on savings accounts
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Nationwide Building Society has launched a new savings account today, which is designed to reward its current account members. The Flex Regular Saver pays two percent and Nationwide is aiming to help people maintain a regular savings habit.
The Flex Regular Saver details
The new account is available exclusively for current account members looking to put money away regularly and it is available for a limited time only. The account can be managed online and is a limited access, regular saver paying a competitive two percent AER/gross p.a. (variable) for 12 months, after which it will revert to an instant access account.
Members will be able to save up to £200 per calendar month and are allowed up to three withdrawals within the 12 months after the account opening. It can be opened via Nationwide’s website and by using the Internet Bank or Mobile Banking app.
Flex Regular Saver is only available to members who hold one of the Society’s current accounts which include the FlexPlus, FlexDirect, FlexAccount, FlexStudent, FlexGraduate, FlexBasic or FlexOne account. Members will only be able to open one Flex Regular Saver – either as an individual or a joint account.
Those who don’t have a current account with the Society can open one in order to be eligible for Flex Regular Saver. The Society is currently offering a £125 switching incentive for existing members (£100 for new customers) who switch into either a FlexDirect, FlexAccount or FlexPlus account using the Current Account Switch Service.
Tom Riley, Director of Banking and Savings at Nationwide Building Society, commented: “In the current environment having a savings nest egg to fall back on is more important than ever, so as the UK’s biggest building society we do all we can to help and encourage people to save on a regular basis.
“By rewarding our current account members, Flex Regular Saver is a further demonstration of the benefits of having a current account with Nationwide. However, it is only available for a limited time, so I’d encourage members to act early to benefit from one of the most competitive savings accounts in the market.”
While the withdrawal limit may put some savers off, it should be noted many of the best rates available at the moment can only be found with accounts with long-term fixed rules.
Recently, as the latest inflation figures were released, Moneyfacts.co.uk examined the best savings deals available to Britons. Among the options, UBL UK is paying 2.14 percent but only for its five-year fixed rate bond.
Additionally, last week Moneyfacts.co.uk released its latest “Pick of the Week” and the recommended savings account was also long-term.
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Savings rates struggle
Eleanor Williams, Finance Expert at Moneyfacts.co.uk, highlighted Zenith Bank’s Three Fixed Term Deposit as offering one of the best options for savers at the moment.
She said: “Zenith Bank (UK) Ltd has increased the rates on a couple of its accounts this week, including its Three Year Fixed Term Deposit. Rising from 1.78 percent to now pay 1.82 percent on anniversary, this account improves its position in the top 10 when compared to other bonds with similar terms currently on offer.
“Savers may well find the return appealing, but will need to be comfortable securing their savings pot away for the term of the account, as neither early access nor further additions are permitted so careful planning would be advised. Overall, the deal secures an Excellent Moneyfacts product rating.”
Long-term or not, savers will want to take advantage of these deals where they can as average rates are at all time lows at the moment. Moneyfacts.co.uk also warned recently there is not a single savings deal available which can now beat inflation.
Additionally, the average no notice savings rate is now sitting at 0.1928 percent, the lowest it has been for over five years.
Inflation to make interest rates rise “unavoidable”
Despite the fact that the savings market is struggling at the moment, many expect interest rates will rise in the coming months as the Bank of England will be forced to react to inflation.
Recently, inflation, as measured by the Consumer Price Index, reached 4.2 percent. This is the highest it has been in 10 years and more than double the Bank of England’s two percent target.
In recent months, the Bank of England and individual policymakers at the central bank have hinted rate hikes may be on their way and Vasso Ioannidou, a Professor of Finance at Bayes Business School noted these increases will be coming sooner rather than later.
He said: “Based on the latest figures, the inflation rate of 4.2 per cent is more than twice as high as the Bank of England (BoE) target rate. It is significant that it is expected to rise even further in the next months, so it is unavoidable that the BoE will have to raise interest rates and do so very soon.
“The rise in inflation implies a loss in purchasing power, with shoppers being able to afford fewer goods or services with the same amount of money. “The loss in the real value of disposable income, currently projected at around seven percent, combined with increases in taxation, is significant.
“The current increase is largely driven by a rise in fuel costs and a double digit-rise in energy prices. This affects low-income households more as transportation and heating expenses are typically a larger fraction of their budget.”
Problems exacerbated by energy
Inflation issues may also be made worse by the ongoing energy crisis and decreased consumer demand. Additional analysis from Professor Ioannidou showed that in comparison to one year ago, gas prices are up by almost 30 percent, electricity by almost 19 percent, petrol by more than 22.5 per cent and food prices by almost 1.5 percent.
A lack of supplies due to labour shortage is also impacting inflation and Professor Ioannidou argued this is negatively impacting what is left in the pockets of consumers and it will force a decrease in consumer demand and deleveraging from both families and businesses, following a long period of low interest rates.
Professor Ioannidou concluded: “Any rise in interest rates will help decrease demand more generally and help control the overall price level. There are concerns, of course, as both firms and households are highly levered after an extended period of low interest rates.
“An increase also raises concerns about a drop in equity values. The very low interest rates in the past decade helped fuel continued stock market rallies, whereas sharp increases in the future may bring a sudden stop and even correction to the market. This is a concern for both individuals and institutional investors, who have significant investments in equity markets.”
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