Now is a good time for savers - here's why

03rd June 2015

You may think this is bonkers but savings are in a pretty healthy place at the moment. With the Consumer Price Index (CPI) at such low levels, the best easy access account paying 1.50% is currently not being eroded by the effects of inflation. Better still you can earn 3% gross in high interest paying current accounts for balances between £3,000 and £20,000, all with the absolute security offered by the Financial Services Compensation Scheme. Okay, so 5% with no restriction on how much you can deposit and all the benefits would be better, but lets give credit where credit is due. 

For the first time since official records began, the CPI Index fell by 0.10% in the year to April 2015.

As many of you may know, the Consumer Price Index is a measurement at which the price of goods and services bought by UK households rises, or in this case, falls. 

The CPI 12 month figure to April 2015 was -0.10% which means that if the basket of goods cost £100 in April 2014, it would cost just £99.90 today.

Of course the rate of inflation may not reflect your own personal circumstances which will depend on the goods and services your household actually purchases. For example, the largest downward contribution to the change in the 12 month CPI rate, was a fall in air and sea fares, so if you don’t frequently travel by aeroplane or boat, then you might not feel such a benefit.

On the flip side, the biggest upward contribution to the index was a rise in the price of petrol and diesel, so if you don’t drive, you may be even better off. This is why our own personal inflation rate is more important than an overall general rate as, put simply, we all spend our money in different ways.

So exactly why do we think it is a good time for savers?

At the moment, savers are suffering - with a record low base rate for over six years and savings rates being hit hard. That said, at least we’ve also had relatively low or in this case negative inflation, certainly recently. Back in the 1970’s and early 1980’s, RPI inflation reached the dizzying heights of more than 26%. And whilst savings rates were much better than they are today, the highest the Bank of England base rate reached was 17%.

When we launched SavingsChampion back in November 2011, the best easy access account was paying 3.15% gross/AER – more than double the best buy account today. However CPI inflation stood at 4.80%.

So whilst savers possibly felt as though they were getting a better deal due to the extra interest earned, in real terms, after inflation, the return was negative – even for non-taxpayers. In fact, in January 2013, with falling savings rates and increasing inflation there were no traditional savings accounts that beat or matched inflation and just two cash ISAs.

Today, if you are prepared to deposit money into a high interest current account you can earn similar levels of interest, as mentioned above (3% AER on balances of between £3,000 and £20,000 on the Santander 123 account – even higher rates of up to 5% AER on much lower balances with TSB and Nationwide).

If you haven’t reviewed your savings for a while, or simply don’t have the time, why not call us on 0800 321 3581 and let Savings Champion save you time and money.

Unlike comparison sites, you can call an expert savings adviser who will help you identify the best account for you. We will tell you if can earn more interest and how to protect your savings.

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