savers

A WARNING has been issued to savers missing out on hundreds of pounds ahead of a key Bank of England (BoE) decision this week.

People risk the cash blow because they’re leaving money in low-paying easy access accounts.

The latest data from Moneyfactscompare.co.uk reveals someone with £10,000 in savings could earn an extra £300 by switching to an account with a higher interest rate.

Adam French, from the comparison site, said savers were in danger of their hard-earned cash “languishing” by making the mistake.

“Simply switching a £10,000 savings pot away from a high street bank’s easy access account to a market-leading one-year fix can leave you £300 better off in 12 months’ time.

“Not a bad return for a few minutes’ work, if you aren’t going to need access to the money sooner.”

The warning comes ahead of the BoE’s Monetary Policy Committee (MPC) meeting on Thursday (August 7) where it will decide what to do with the base rate.

The base rate is charged to high street banks and other lenders and usually reflected in savings and mortgage rates.

Any fall is good news for mortgage holders who tend to see rates plummet, but it spells bad news for those with savings accounts.

The bank is widely expected to cut the base rate, which currently sits at 4.25%.

The MPC, made up of nine members, last met in June when it decided to keep interest rates unchanged.

Six members voted to keep rates at the existing level while three members voted for a cut to 4%.

The BoE uses the base rate to control inflation, with a hike designed to discourage spending and keep prices in check.

The current Consumer Price Index (CPI) measure of inflation is 3.6%, over the BoE’s 2% target.

However, the MPC is under pressure to lower interest rates to get the stagnating economy growing.

How to make your savings work harder

You can’t do anything to control what the BoE does with the base rate, but you can make your savings work harder.

One way to do this is by locking your savings into a fixed-term account.

These accounts pay out an interest rate for a set period of time, from anywhere between six months and five years.

Fixed-rate savings accounts generally offer better interest rates in exchange for you not being to withdraw any cash.

Just bear in mind you may have to pay a charge for any early withdrawals.

Second, it’s worth making the most of ISAs which allow you to save money without having to pay tax on any interest earned.

You can spread a total of £20,000 across various ISA types including Cash ISAs and Stocks and Shares ISAs.

And of course, shop around for the best deals so you’re not left with a low-paying savings account.

Comparison sites like moneyfactscompare.co.uk and moneysavingexpert.com can help you find the best account suited to you.

The chancellor has told the financial industry it must change the “negative” narrative around savers investing money in stocks and shares in order to help grow the economy.

In a speech, Rachel Reeves said: “For too long, we have presented investment in too negative a light, quick to warn people of the risks without giving proper weight to the benefits.”

The government is working with the financial regulator to provide support for would-be investors.

It comes as Reeves stepped back from cutting the tax-free limit on cash Individual Savings Accounts (Isas) after a backlash from lenders – she is keen to shift some of the £300bn in these accounts to being invested in the UK and its companies.

At the annual Mansion House dinner in the City of London, Reeves told business leaders: “Our tangled system of financial advice and guidance has meant that people cannot get the right support to make decisions for themselves.”

She said the government is consulting with the Financial Conduct Authority “to introduce a brand-new type of targeted support for consumers ahead of the new financial year”.

The government is under pressure to ignite growth after figures revealed the UK economy shrank in May following a contraction in April.

Meanwhile, U-turns on welfare benefits and the winter fuel allowance have stoked speculation there could be tax rises in the Budget later this year.

Some Labour MPs have previously suggested a wealth tax, such as a 2% tax on assets worth more than £10m, could raise £24bn per year.

Speaking at the Mansion House event, Sir William Russell, former Lord Mayor of the City of London, told the BBC: “Unfortunately, there’s going to be this pause between tonight and October. In a way, that’s not good because there’ll be speculation about wealth tax which I don’t think will happen, this government is much more sensible than that.”

But he said: “That pause doesn’t help because there is uncertainty and if there’s one thing we all would agree with, the City does not like uncertainty.”

Reeves said the new measures to encourage consumers to invest would mean “savers can reap the benefits of UK economic success”.

But the value of investments in assets such as shares can go down as well as up, and savers have tended to be cautious over the risks involved, although the spending power of savings can be eroded by rising prices.

The government has in the past encouraged the public to buy shares in UK companies, including in 2013 when Royal Mail was floated on the London Stock Exchange.

But perhaps the most famous example was in 1986, when the state-owned British Gas was privatised and Margaret Thatcher’s government launched the “tell Sid” campaign. TV adverts featured characters urged each other to “tell Sid” about the chance to buy shares in British Gas.

In reference to her recent travails – including a tearful appearance in the House of Commons – Reeves said that during a visit to a school, a girl had asked her what job she would do if she could have any job in the world.

“Given the events of the last few weeks, I suspect many of you would sympathise if I had said “anything but chancellor”,” she joked with the audience. “But I didn’t.”

In her speech, Reeves said she would “continue to consider further changes to ISAs, engaging widely over the coming months”.

She also provided more details about changes to the UK’s financial services sector including reforming regulation.

“In too many areas, regulation still acts as a boot on the neck of businesses,” she said. “Choking off the enterprise and innovation that is the lifeblood of growth.”

She said regulators in other sectors “must take up the call I make this evening not to bend to the temptation of excessive caution but to boldly regulate for growth in the service of prosperity across our country”.

Ahead of giving his own speech at the Mansion House gathering, Bank of England governor Andrew Bailey was asked if there was a trade-off between providing stability and growth.

In the past, Mr Bailey has been cautious about deregulation.

But he told the BBC: “In no way am I suggesting that all our rules are perfectly formed so no, there isn’t a trade-off, but that doesn’t mean to say that we don’t change and modernise the system and keep it up to date – we balance those two things.”