Just 8p a day interest in the worst year for savers on record

By Becky Barrow

Running low: Savers have endured the worst year on record


Savers have suffered their worst year on record with the average account paying just 8p a day, research reveals today.

The crisis is so bad that things may not improve for up to five years, experts warn.
Millions of pensioners who rely on the income from their savings to survive are among the worst affected.

Savings have been hit by the Bank of England’s attempt to rescue the economy by slashing its base rate to 0.5 per cent, the lowest since the Bank was founded in 1694. Economists predict it could stay below 1 per cent for five years.

The research by financial information firm Moneyfacts is based on someone putting £3,500 into a savings account on January 1 last year.

This is the average amount that Britons have in a savings account, according to the latest figures from the Office for National Statistics.

The low rates mean the accounts are earning almost no interest, with the average rate on an easy access savings account just 0.84 per cent – the lowest since records began in 1988.

For the whole year, it is worth a paltry £29 – or 8p a day.

But in 2007, before the recession began, the average savings rate was 3.94 per cent. This was worth £138 a year for a person with the average £3,500 in a savings account.

Michelle Slade, a financial analyst at Moneyfacts, said: ‘Savers had the worst year on record – and 2010 is not going to get any better.

‘Savers have had a dismal year as rates have fallen to record lows. People who rely on the income from their savings to supplement their income, such as pensioners, have been the hardest hit.’


The worst offenders are paying zero per cent on their savings accounts, which means their customers do not get a single penny in interest.
Many others are paying just 0.05 per cent. The Dudley Building Society pays 0 per cent on its Instant Tracker account on balances up to £500, and Cheltenham & Gloucester pays 0.05 per cent on its Direct Transfer account on balances below £10,000.
Half the country’s 11million old people rely on some income from their savings to supplement their weekly income, according to research by the National Pensioners
Convention.
Official figures also show that about 55 per cent of pensioners receive less than £10 a week from their investment.
NPC General secretary Dot Gibson said: ‘Since the recession began, pensioners have seen their income devastated by the drop in interest rates. Now they are struggling to survive the rising cost of living, and there does not appear to be any end in sight.’
Kevin Mountford, head of banking at the financial comparison website Moneysupermarket, accused banks and building societies of ‘luring’ in customers with ‘exciting’ rates which quickly fall. Firms rely on customers being too lazy to switch, he added.
Although pensions minister Angela Eagle told the House of Commons recently that the Government was ‘concerned’ about pensioners who rely on savings income, they will get just £2.40 extra a week from their basic state pension this year.


source: dailymail