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Low interest rates on savings

A

AnnO'Neemus

Is so vanilla
Received an email from my bank saying that they're going to be reducing the interest rate on their 'Online Cash ISA' accounts.

Tbh, I didn't have a clue what the current rate was, so just checked: 0.15%. And it's going down to 0.09%.

If I'd had to guess, I was vaguely aware interest rates were low, so I'd have said maybe the interest rate was 1%. I had no idea they were so dire.

I've always tended to be shit with money, but currently have a small amount of savings in an ISA, because I 'knew' ISAs were supposed to be good, or at least better than keeping your money in a current account.

But 0.09% is dreadful. That's effectively losing value/money on savings, because inflation on food and bills is running higher than that. So my savings won't be earning money, the money will be depreciating in value.

What's better than an ISA? (Don't say Bitcoin or shares in Gamestop.)
 
Everything's taken a massive hit due to COVID. Don't lock your money away for more than a year, in case things get better, unless you can afford to.
 
You have to determine yer risk appetite. The ISA is solid but unenthusiastic and UKG underwritten, anything else is gambling. How much risk are you willing to accept?

premium bonds are misery but if you think of it as getting a free entry to a monthly million quid draw then it makes it slightly more palatable but still utterly solid misery , albeit impacted by inflation. Meh
 
baldrick said:
A stocks and shares ISA. Pick a provider with low fees and a index tracker fund and robert's your father's brother.
Click to expand...
Exactly this - have a think about what your time scale is for saving, because you might decide to adjust your risk levels depending on how soon you need it. Stocks can go down as well as up, so if you need them next week, it's probably not a good idea to invest in a stocks and shares ISA. Conversely, if you need them in 25+ years, you might decide to invest in 100% equities. Anything in between, you might want to mix in some bonds for security.

If you're repulsed by stocks and shares, the best you're going to get is something like Premium Bonds, which are a piss poor return, but might have a chance at winning big if you're lucky. Other alternatives are a 0.5% saver from Marcus (Goldman Sachs <spit>).
 
First off, what do you need the money for and when might you need it? Would you be happy to invest it for ten+ years with the provisio it might go down before it goes up i.e. if you withdraw it half way through you might lose out.
 
It’s probably not a terrible time to invest in shares UK, either, with them still being 15% less than their peak value. Obviously, it’s not as good a time as it was 3 months ago when they were 15% lower still.
 
Realistically for decent long term returns you need some sort of stocks and shares fund, but if you need it back in a hurry you may take quite a hit.

for example if you’d needed it in a hurry last April you could have taken a loss.

first thing I’d say is - if it’s long term - what about your pension which is tax free ?

If you might need it in a hurry, you either need cash or something with lower % of shares ( equities ).

Alex
 
Even 1, 3 & 5 year fixed bonds have shit rates right now, It all depends how much risk you want to take. I ended up putting some of my savings into my pension (fixed rate bond matured in Jan), as that's doing quite well right now and 8k instantly became 10k. But of course I won't be able to access that until pension time comes. As I haven't paid NI for last couple of years (not working), I also put some of my savings into my state pension in the form of NI contribution. I'm in for the long game :D But only because the saving rates are dreadful and I'm not willing to do stocks and shares myself. Also, pensions could go badly wrong. Just put eggs in different baskets if you can
 
I had a savings account that paid a whopping 2% for the last year, and as it was only for that fixed period the rate has dropped to 0.01%. At least it encouraged me to actually save some money as you had to pay in some every month.
 
My bank saving account is 0.01% my sipp pension is about 7% but i cant touch it for years. Banks basically suck for earning any interest these days.
 
I've got up to the UK FSCS limit in Goldman Sachs Marcus, and almost the equivalent in AIB/ Post Office. Both were market leading when I took the accounts out - when I accepted an offer on my house. When I actually had money from the sale, the rates had plummeted!
 
I had a year lock in with FD at 2.75 percent and it almost wasn't worth the interest after tax. Meh I'll hold out and wait for things to improve. Not sure I could be assed with the stocks and shares shit.
 
Please do be arsed with stocks and shares shit. It’s not one whit more effort and I’ve averaged about 7-8% per year on it over the last seven years with no skill or stock picking ability whatsoever. Don’t do it with money you might need to get it in a hurry. Otherwise, don’t lock into a 2% return over three years when you could literally have quarter as much again of your original funds in that time.
 
coventry building society are about the least shit when it comes to interest rates at the moment, but it's still something like 0.5 %

premium bonds has at least a chance of a payout, and with interest rates generally so low, you're not really losing out by not getting interest if you don't win anything

anything involving stocks and shares has a risk element - a managed fund / ISA / friendly society thing is going to be lower risk than investing in one or two companies
 
kabbes said:
Please do be arsed with stocks and shares shit. It’s not one whit more effort and I’ve averaged about 7-8% per year on it over the last seven years with no skill or stock picking ability whatsoever. Don’t do it with money you might need to get it in a hurry. Otherwise, don’t lock into a 2% return over three years when you could literally have quarter as much again of your original funds in that time.
Click to expand...
How the hell did you manage that with no skill or effort, some sort of tracker fund?
 
kabbes said:
Please do be arsed with stocks and shares shit. It’s not one whit more effort and I’ve averaged about 7-8% per year on it over the last seven years with no skill or stock picking ability whatsoever. Don’t do it with money you might need to get it in a hurry. Otherwise, don’t lock into a 2% return over three years when you could literally have quarter as much again of your original funds in that time.
Click to expand...

Can you explain how it would half? Due to inflation? I don't really understand it fully. I have all mine in a low interest account at the moment but it's only been in there a for a month so not a big deal. I need to access it.

I advise anyone to sign up to the money saving expert email as they constantly update on changes.
 
bimble said:
How the hell did you manage that with no skill or effort, some sort of tracker fund?
Click to expand...
A variety of funds that performed with more or less success. Broadly, though, yes. The UK has performed worst of the developed nations over the last five years thanks to Brexit and COVID and funds with a little bit of focus on selection have done better than the pure tracker but even the basic FTSE all-share has managed about 6% per year on average over the last five plague- and Brexit-infested years (look down the page at the trailing return for this info).

Vanguard FTSE U.K. All Share Index Unit Trust GBP...|GB00B3X7QG63

Fund price for Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc along with Morningstar ratings & research, long term fund performance and charts
www.morningstar.co.uk www.morningstar.co.uk

Remember that buying stocks means getting a dividend (average UK dividend tends to be about 3% per year) before even allowing for any growth. And in the neoliberal hell we call the modern world, the game is totally rigged in favour of capital, ie companies. So it’s no great surprise to find that investing broadly in companies tends to produce a positive result.

Note that there are individual years with double digit negative returns though. That’s why you don’t invest in the stock market if you might want your money out in a hurry! Having the luxury to time an exit for when things are on the higher rather than lower side makes a big difference.
 
bimble said:
How the hell did you manage that with no skill or effort, some sort of tracker fund?
Click to expand...
Yes, exactly. I had the same return on mine. There's no trick to it really. I had no idea what I was doing (I still don't, really) so I set up a DD for the minimum I could, think it was £25 a month and picked the FTSE 250 tracker. After a while, that seemed to go well, so I put it up to £50 a month and picked a different tracker, I think I did a UK gilt one for that and it went from there. The way I approach it is this is money I can afford to lose so if it all goes tits up I'm not relying on it in any way.
 
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