As savings rates soften, what does it mean for how you manage your wealth?

Are you missing out on more than £100 a month in savings interest, simply by not shopping around for the best account?

According to research reported by MoneyAge, that’s exactly what is happening to the top 20% of households in the UK.

The study found that, of the 20% of richest households (which have an average of £36,276 in cash), the difference between the average rate payable by a high street savings account and the best on the market could cost them £1,222 a year.

And, as interest rates fall for a second time this year, finding the right home for your savings is ever more important.

Read on to find out why your savings rates are set to fall, what to do if you have some of the £73 billion in fixed bonds set to mature soon, and how investing could help you generate more positive returns.

Interest rates are falling

On 7 November, the Bank of England (BoE) cut the base interest rate to 4.75% – the second cut this year. Now that inflation has reached the Bank’s target of 2%, the BoE expects interest rates to continue to fall in 2025.

These cuts mean that, over recent months, interest rates on savings accounts have also fallen, reducing the returns you can expect to receive on your cash savings.

Moneyfacts reports that the top rate on a one-year fixed-rate savings bond has fallen from 5.18% six months ago to 4.85% at the start of November, while the leading rate on a two-year bond has fallen from 5.05% to 4.65%.

Billions in fixed-rate savings are set to mature by the end of 2024

Research reported by consumer champion Which? has revealed that more than £73 billion is sitting in 2 million fixed bonds and ISAs due to mature before the end of 2024.

If you have cash savings coming to fruition in the next few months, then it’s important to proactively manage what happens to these savings. When a fixed bond matures, the provider may:

• Move the money into a different sort of account, often an easy access account
• Pay the money into your current account
• Roll the money over into a new bond.

In each case, the account you end up in will likely pay a lower interest rate. So, it’s important to shop around to find a new home for your savings. As the data above shows, failing to do this could cost you more than £1,200 a year in lost interest.

Investing your cash could help to generate a positive return

As interest rates fall, you may be looking for alternative ways of generating a positive return on your savings.

If you’re saving over a medium- to long-term period – usually five years or more – then investing your cash may offer the potential for a better return.

While investing does come with an element of risk – the value of your investment can go down as well as up and you may not get back the full amount you invested – historically investing has generated more positive returns than holding your wealth in cash.

Here’s an example from Moneybox showing the returns of cash compared to the returns of investing (assuming £1,000 saved/invested) over a 10-year time frame from 2013 to 2023.

Source: Moneybox. Investing returns are based on Moneybox’s Balanced Starting Option and include all fees. Where available, returns data for the selected funds have been used. Where the fund has a shortened performance history, we have used the appropriate index to simulate performance. Cash returns are based on the best available cash interest rates at the beginning of each year.

Remember that past performance is not a reliable indicator of future performance.

So, if you have cash savings set to mature in the next few months, or you’re concerned about falling interest rates, investing may offer an alternative way to grow your wealth.

Get in touch

If you’d like to find out how to make more of your cash savings, please get in touch.

Email contact@caliberfm.co.uk or call 01525 375286 to speak to one of our team today.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.