15th June 2015
Up to 14.6m Britons are not saving a penny, with low interest rates one the main reasons they are not bothering claims new research from MoneySuperMarket.
The comparison site found that while 78% of people have stated that they cannot afford to save, a further 18% admitted that given the base rate is so low at the moment, they do not believe it is worthwhile.
The study found some 11% used to save but because of languishing rates they now do not see the point, and 7% who blame low rates have never actually been savers.
Out of those who say low interest rates are responsible for their lack of savings, interest of £222 per year on average would kick-start their savings habit again. But consumers require a hefty deposit to earn this amount in interest.
For example, NS&I’s Direct ISA offers an AER of 1.50%, however savers still need to invest a whopping deposit of a £14,669 to amass an annual interest amount of £220.
Anyone opting for a fixed rate bond would still need a sizeable deposit too. Secure Trust Bank’s Fixed Rate Bond has an AER of 3.01% so savers need £7,325 in there to accrue £220 in interest but would need to tie up their savings for five years to achieve this.
Kevin Mountford, head of banking at MoneySuperMarket said: “Savers have suffered for some time now due to low interest rates, but it’s really concerning that this has stopped some people saving altogether.
“Although ISAs, easy access accounts and fixed rate bonds might not be providing massive returns, saving a little amount money is far better than saving none at all. ISAs come with tax-free benefits, so it is worth stashing some cash away, even if the interest isn’t quite what you’d hope for. In addition, ISA rates have slowly begun to creep up, and hopefully we’ll see this continue, and providers will start ramping up their offerings as a result.”
Notably current accounts are an attractive alternative to save money right now, and many providers are taking advantage of the poor savings rates at the moment by increasing their offers and benefits to entice customers.
“Now you can earn as much as £150 cashback just for switching, and several current accounts pay better rates than some savings accounts at the moment, so it’s worth considering these to get more for your money,” added Mountford.