October 27, 2009

Onshore and offshore savings

Filed under: News — Tags: investments, rates, saving —

This week see the NS&I raise savings rates this week in order to attack more savers to government coffers, and by all accounts the new rates are very competitive in the existing market.

The trouble is, however, is that savings accounts in general, in both the UK and overseas, remain generally depressed by low central bank interest rates.

This particularly hits hard those who invested in offshore saving previously, as the low rates and returns globally mean the tax advantages now become quite muted, at a time when share prices have fallen dramatically.

Still, at least it is encouraging to see some providers actively trying to encourage more savers to join with them. This is especially important as the savings ratio for the UK has increased to 5.6%, which means that more Britons are trying to save and invest their money.

The savings tables at Moneyfacts shows an interesting perspective, with building societies in general leading the way with savings rates for normal accounts, though interest does generally stay under 2%.

The really interesting part of the modern savings landscape, though, is that both banks and building societies are trying to lock savers into bond or fixed term accounts - ie, that instead of instant access or notice savings accounts, they are looking for guaranteed periods of investment where the money cannot be touched.

In effect, savers are becoming bond holders, whether they like it or not.

This has to be a disturbing development, though, because in the current landscape, savers really should be able to rely on competitive savings rates, and still have access to their money. Instead, they are being asked to put up with little access and little return.

While the hope is that the financial crisis is easing, the warning remains that the UK recession could get worse.

In the meantime, if you are looking to save, you are more likely to be forced to become an investor to take stock of decent savings rates being offered, so why not consider investing in bonds and shares directly via an investment portfolio?

Story link: Onshore and offshore savings