I’m one of these people who like to squirrel away money in different places whenever I can, although saving is becoming increasingly difficult for the average household these days. We saw last week that inflation continues to rise, while wages are falling behind. It isn’t necessarily a crisis, but for the average family, putting money away at the end of each month has become a challenge.
It doesn’t help that interest rates continue to remain at record lows too, with banks seemingly determined to chase customers away by paying minimal returns. It seems like a lifetime ago that getting 5 percent interest on savings was the norm!
However, rather than be all doom and gloom, I’ve had a bit of a look around to find some sneaky ways to boost savings and ensure that they are generating a decent enough return. Here goes…
Switching bank account
The thought of having to go the bank excites precious few. However, thanks to the Current Account Switch Service, switching puts all the onus on the banks to move direct debits and the rest over. You just have to initiate the switch. And the rewards are handsome. For example, opening an HSBC Advance account pays a bonus of up to £200, while the Co-Operative bank has an equivalent bonus of £125. And with First Direct (£100 bonus), you can switch to a bank with award-winning customer service. Given how little work this requires, switching really does represent money for nothing.
Rising savings rates
Don’t get your hopes up – there aren’t any easy access accounts that can match the rate of inflation. But there are some that are beginning to raise the bar at least. The 1.5 percent offered by Santander on their 123 accounts is still competitive, as is the 1.21 percent on a Virgin Money Double Take E-Saver account. If you’re willing to put your money away for a year, Atom Bank will yield a rate of 1.9 percent, while for a two-year fixed rate, they increase it to 2.1 percent (2.25 percent over three years). Not electrifying, but if you look around, there are ways to earn that little bit more; and every penny counts.
Cash ISAs used to be the apple of many consumers’ eyes. They’re simple, easy to understand, tax-free, and, until a decade ago, yielded great returns. That picture has changed considerably since. But while the pickings are a bit slim, there are some providers which stand out. Coventry Building Society fetches a rate of 1.05 percent, as does Paragon Bank. Yorkshire Bank does 2 per cent per annum for 3 years, while you can get 2.15 percent by locking your money away for five years in a Virgin Money cash ISA.
The most interesting newcomer to the fray is the Lifetime ISA, which is effectively a retirement and/or first-home-buying bonus scheme. In short, for every £4 you put towards this account, the Government tops you up with £1. The maximum annual bonus is £1,000, so, given that you can theoretically contribute to this type of ISA from the age of 18 (until you turn 50), it means a bonus of £32,000 can accrue. The restriction is that, if you withdraw the money before turning 60, the bonus is forfeited and the penalties are hefty – unless you do so to purchase a first home, or to cover the costs of a terminal illness.
Peer-to-peer lending ISAs
Peer-to-peer lending is the new kid on the block and acts as a midpoint between saving and investing in terms of risk and reward. You lend through an online platform directly to those in need of a loan, and the platform vet borrowers for creditworthiness to reduce the risk that they default. They also tend to have some security measures in place as a buffer against default too. In return, you get returns in the region of 5 percent, and, with a new category of ISA dedicated to the sector, this income can be tax-free. Definitely a refreshing addition to the market!
written in collaboration