UK Savers Should Opt For An ISA Or Fixed Rate

So after the latest base rate cuts by the Bank of England what should savers be doing to ensure they get the best returns? The base interest rate has fallen from 5% in October to just 1% now and while many feel the cuts simply aren’t working, it is possible that they might reach 0% in the second quarter.

These cuts mean savers, especially the elderly who rely partly on savings income to pay for everyday things, are having to work twice as hard to find those few high interest accounts. There are still good deals out there but you may find the only way to get them is to commit to a fixed period and leave your investment untouched until the end of this term.

A cash ISA is still the best option for long term gains because of tax free status they enjoy and a higher rate taxpayer will enjoy an effective 40% boost to their return by going down this avenue. Most ISA will let you withdraw money at any time but remember that you cannot then put that back in at a later date due to the restrictions placed on these accounts by the government.

Alternatively, to get even higher rates which are taxable you might want to check out fixed rate bond accounts which are growing in popularity. These do require you to lock away your investment for a period of between one and four years but you can currently find interest rates close to 4% in several places which is around 3% higher than the average instant access account these days.

The only sticking point with these fixed rate savings options are that if you do need to withdraw any of the money during the fixed period you will end up with a rate which is far worse and likely to be almost nominal.

Another thing to look out for are accounts with bonus rates which may only last 6 months or a year but are a haven for your money until you can transfer them somewhere else when a better deal comes along.

So there you have it, the choices for UK savers are not always that appealing but by looking in the right places you can still bag a great rate.