The New Year brings a renewed energy to most of us, a time to think about how we will change our lives for the better for the next 365 days, with resolutions that we hope to keep for longer than the end of January.
Reviewing our finances to improve our overall position for the coming year is likely to be high on the list of lifestyle improvements and savings are an integral part of this. It has been far too easy in the last few years to think that there is little point in moving our savings around to get a better deal, because interest rates are so low that it will make little difference in the long run. But that is definitely not the case.
For example, if you have not yet taken advantage of the high interest current accounts available – which are paying as much as 5% gross/AER – then you should move the maximum amount you can into these accounts. Across some of the best high interest current accounts, you can put away as much as £35,000 and the lowest rate you would receive would be 1.50% AER from Santander’s 123 Current Account. Even this is 50% more than you would get from the highest-paying easy access account right now.
If you are able to tie your money up for a period of time, you can get some fairly competitive fixed rate bonds right now too. Atom is offering 1.40% gross/AER over one year, and 1.60% gross/AER over two years, with Masthaven taking top spot over three, four and five years with 1.67% gross/AER, 1.84% gross/AER and 2.01% gross/AER respectively.
Of course, there might be a reluctance to sign up with some banks that you have ‘never heard of’, but these challenger banks, as they are known, are the ones that are keenest to get your money, so will be offering you the most in interest.
Challenger banks are just as valid as any other banking institution, they are governed by the same regulations as the big banks and your money is protected under the UK Financial Services Compensation Scheme (FSCS). But because they are smaller and more nimble, they are able to make decisions more quickly and cost effectively in many cases, which can be a big benefit to their customers.
A report from KPMG last year, which was created in association with Savings Champion, showed that on average the challenger banks offered the best rates for savers and that their simple business models meant there were significant cost advantages over the big banks, which allowed them to be more competitive than the ‘big five’ main high street names.
The primary difference is that challenger banks are looking to savers to build their books, unlike the big banks, so they are prepared and happy to offer better savings rates to get that money through the door. Given the amount protected under the UK’s Financial Services Compensation Scheme could potentially rise to £85,000 again from January 30, there is even less to be concerned about with the challenger banks.
The most important reason to be with them is to get more from your savings and that is something none of us should want to pass up as we head into 2017.
If you would like to find out more about any of the providers featured in our best buy tables, please get in touch. Call us on 0800 3213581 or email [email protected], we'd love to hear from you.