How NS&I’s savers can better their returns

How NS&I’s savers can better their returns

For non-Isa cash savings, Britannia’s Select Access Saver pays 1.75pc (there is no short-term bonus) on minimum deposits of £500. The account can be operated by post or branch.

Online accounts to consider include Coventry’s Online Saver (1.6pc, again no bonus) and Sainsbury’s Bank eSaver Special (1.55pc, minimum deposit £1,000).

Savers have had some cause for hope with rates on fixed-term bonds rising slightly. Top rates over one year are now at 2pc (Britannia); at three years a little more than 2.5pc (Saga and ICICI) and at five years they have passed the 3pc mark (Secure Trust Bank).

Leeds Building Society last week launched two five-year accounts – its Fixed Rate Bond and Isa – paying 3pc. It is unusual for accounts to pay the same rate for both non-Isa and Isa investments. Another feature of the accounts is that for a lower rate of 2.75pc, savers can take a version of the bonds where up to a quarter of their investments can be withdrawn before maturity penalty-free.

Susan Hannums of, the rate-tracking website, said: “In the current climate it is good to see a provider launching competitive rates, particularly accounts with an element of flexibility. What makes these deals stand out from the competition is the lower-rate options, which are still fairly competitive but allow access to some of the funds before maturity.”

She added: “The five-year Isa leaps straight to the top of the best-buy tables, replacing by some margin the previous best rates.”

Improved rates are welcome but commentators warned that a “few attractive deals” did not necessarily spell a wider trend, and rock-bottom returns on cash were set to persist.

This climate of ultra-low returns is driving some savers and borrowers to take too much risk, a former Government adviser warned.

Ros Altmann, an economist, said the Bank of England’s “blinkered” low-rate policy could now pose a threat to the financial system. She said borrowers were being enticed to take on loans at artificially low rates as mortgage lending picked up and house prices rose. Meanwhile, savers are pouring money into stock market investments because the rates on cash savings accounts have plunged.

“Ultra-low interest rates are distorting the economy,” she said. “This is what caused the crisis in the first place, when financial markets misunderstood or mispriced risk and encouraged irresponsible behaviour.

“Rather than providing cash savings for banks to recycle to riskier lending, savers are being forced to turn to riskier activities themselves in order to stop the value of their savings eroding.”

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