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MONEY COMMENT
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Last week, the Building Societies Association revealed that British savers put £1.2 billion into deposit accounts in September, compared with a mere £121 million in September 2003. Wow! I wonder what caused this mini savings boom – and will it last? Perhaps savers have noticed that rates are becoming increasingly more attractive. The Bank of England has raised its base rate five times since November 2003, taking it from 3.5% to 4.75%. What's more, banks have upped the ante in the war for our money, with some accounts now paying a whopping 7%. I'm delighted with these developments, as it makes saving a more attractive option – and means more money for customers. However, I'm not going to get too excited just yet, as we're the worst savers in Europe! On average, we save around a twentieth of our spare cash (5%). On the other hand, French, German and Italian savers put away about a sixth of their disposable income (16%), and the Spanish a ninth (11%). If you already have some money stashed away, or plan to begin saving, start with a cash mini-ISA. Don't be afraid of the scary jargon: it's just a tax-free savings account. Anyone aged sixteen or over can have one, and you can put up to £3,000 per tax year into it. Learn more here. If you've filled up your cash mini-ISA and still want more, find a top-notch savings account. Here's a selection of Best Buys from independent financial researcher Moneyfacts (sorted by gross rate and then AER). This article explains how the AER (Annual Equivalent Rate) works.
Cash mini-ISAs
Best Buy saving accounts
Company
Account name
Minimum
deposit (£)Gross
rate (%)AER (%)
Abbey
Postal ISA
1
5.35
5.35
Yorkshire BS
e-ISA
10
5.20
5.20
Halifax
ISA Saver Direct
1
5.15
5.15
No-notice accounts
Bradford & Bingley
eSavings
1,000
5.50*
5.37
Egg
(Apply via the Fool)Internet Savings
1
5.50*
5.12
Northern Rock
Tracker Online
1
5.41*
5.05
The AA
Telephone Savings
500
5.36*
5.36
Alliance & Leicester
(Apply via the Fool)Online Saver
1
5.35
5.35
Regular-saving accounts
Abbey
Fixed Rate Monthly Saver
20 to 500
per month
for a year7.00
7.00
Halifax
Regular Saver
25 to 250
per month
for a year7.00
7.07
* These accounts include an introductory bonus.
The one downside of this savings bonanza is that investors are turning away from shares ISAs. In September, investors withdrew more money from their shares ISAs than they invested, which is the first time that this has happened. Sales of these stock-market savings plans have tumbled, following the loss in April of the 10% dividend tax credit that made ISAs more attractive to investors. I do hope that investors aren't losing faith in the power of equities to produce superior returns.
Finally, UK savers have almost £500 billion stashed away in savings accounts. If we could increase the average interest rate we earn by two percentage points, it would mean an extra £10 billion in our pockets. So, do your bit for Britain (and yourself) and sort out your savings!
More: Check out the rates in our Savings and Cash Mini-ISA centres | Five Things Every Saver Should Know.