Savers' year of pain after bank holds rates

Millions of families and pensioners have suffered a year of interest rate misery that has left the average saver nearly ￡600 worse off.

The Bank of England yesterday held interest rates at 0.5% for the 12th consecutive month. Campaign groups said it marked an unhappy anniversary for savers, who have been stung by the worst rates in history.
Their suffering was worsened by research which showed there is not a single easy-access savings account paying a rate which beats inflation. And some experts believe the decision to slash the base rate has not helped the economy as much as had been hoped.

In March last year, the Bank's governor Mervyn King halved the base rate to 0.5% to try to stop a recession turning into a depression.

But Britain was one of the last major economies to emerge from recession, and grew only by a modest 0.3% in the final quarter of last year.

Yesterday the campaign group Save Our Savers said there was widespread fury among savers, who outnumber borrowers by seven to one. Many are pensioners who rely on the income from their savings.

Spokesman Reverend Dr John Strain, a parish priest and financial adviser to the Diocese of Guildford, said they felt a sense of 'betrayal and anger' from rates which are 'pitiful.'

'The fever of frustration among savers has turned into real anger since the financial crisis,' he said.

 

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'Responsible savers did not cause the economic collapse but they are being forced to carry the can yet again. Many are struggling on a much reduced income while others are watching their savings shrink in front of them.'

 

A basic rate taxpayer needs a savings rate of at least 4.38% to make sure that their money is not eroded by inflation, currently 3.5%, according to research from financial information firm Moneyfacts.

 

But none of the 326 easy-access savings accounts pay this rate. The average is a paltry 0.72%. With ￡20,000 in an account, this would pay interest of just ￡12 a month.

Before the Bank started slashing the base rate, savers were getting more than ￡60 a month.

Darren Cook, a savings expert from Moneyfacts, said: 'It is a kick in the teeth for prudent savers. These rates are an insult to their years of hard work to prudently put money aside for the future.'

Some accounts pay 0% or 0.01%, which is worth just 17p a month. But many economists predict that interest rates will remain low for at least a year.