The speculation that the Bank of England base rate could remain at 0.50% until 2015 is devastating news for savers. It’s tough to find a savings rate paying more than inflation, so, it’s vital to avoid the common savings mistakes and instead make your cash work as hard as possible. Here’s how;

1. Don’t leave money in an uncompetitive account

Many people are guilty of inertia and the banks and building societies take full advantage of that. You open an account which was no doubt competitive to begin with, only for it to dwindle to uncompetitive levels over time. You may be unaware that the rate has dropped and even if you are aware you can’t be bothered with the hassle of moving. But if someone handed you an extra £1,525 (i) each year, would you say no? That’s the simple truth between a poor paying account and one of the best easy access accounts for someone investing £50,000.

2. Don’t miss maturity dates

When your fixed rate bond matures and you do nothing, often the consequences are not stacked in your favour. Many of the bond maturity holding accounts pay just 0.10%, before tax. So set a reminder using the SavingsChampion.co.uk Rate Tracker service, then take a look at our best buys and move your money.

3. And the same for bonuses.

The banks and building societies are hoping that you have other things to do when your bonus period comes to an end, with your rate potentially plummeting with it. Using an account with an introductory bonus has become a way of savings life these days but don’t let the providers enjoy the spoils of your inertia.

4. Rate Tracker; simple steps to savings success

Luckily there is a new weapon in the savers armoury. www.savingschampion.co.uk offers savers a free and unique Rate Tracker service that can take some of the strain out of saving and help in the battle against poor paying accounts. Rate Tracker monitors UK based savings accounts, keeping savers informed of any rate changes including bonuses and fixed rate bonds maturing along with updating customers if there are better rates to be found.

5. Why pay tax on your savings if you don’t need to?

I know that we have to pay tax but there’s no point in paying more that we need to – and as savers are getting a pretty raw deal at the moment, it’s important to earn as much interest as possible. So if you are paying tax on a savings account, but you haven’t used up your ISA allowance yet, you’re losing out. Best rates range from 4.50% gross fixed for 5 years, and 3.50% gross variable for an easy access ISA (ii). This is equivalent to a normal taxable account paying 5.63% and 4.38% gross for basic rate tax payers or 7.50% and 5.83% gross for higher rate taxpayers (40%).

6. Loyalty doesn’t pay

For many providers, getting new customers seems to be their prime focus, while you’re lucky if they chuck loyal savers some scraps. Don’t be persuaded by so called “preferential rates” for existing customers as you can often do better elsewhere. HSBC, for example, offers a Premier Savings account which it claims offers preferential rates for premier current account customers but pays a shocking 0.10%. Compare this to 3.17% AER currently with Nationwide Building Society!!

7. Not using allowances

As well as your ISA allowance, there may be other tax allowances waiting to be used or wasted. Does your spouse pay less tax than you? If so, consider putting more savings in their name. Then trust them not to spend the money when you’re not looking!

8. Mattresses are for sleeping on

Whilst you may feel that the banks and building societies are not a safe place to keep your cash, you do have Financial Services Compensation Scheme protection so it makes sense to earn as much interest as possible rather than leaving it under the mattress.

(i) £50,000 in an account paying 3.15% gross AER would earn £1,575 per year before tax, whereas it would earn just £50 in an account paying 0.10% gross AER.

(ii) Best Fixed Rate ISA paying 4.50% AER from Halifax and Best Variable Rate ISA is 3.50% AER with the Cheshire Building Society. (rates applicable on 03/05/2012)

Anna Bowes is a Director at SavingsChampion.co.uk. She has worked in the financial services industry for more than 20 years and for most of that time Anna has been helping people to make the most of their savings. SavingsChampion.co.uk is a no-nonsense, simple to use website that helps everyone to pick the best savings account for them and then, if they sign up for Rate Tracker, ensures that they could always be earning the best

Anna Bowes is a Director at https://www.savingschampion.co.uk/. She has worked in the financial services industry for more than 20 years and for most of that time Anna has been helping people to make the most of their savings.

Author Bio: Anna Bowes is a Director at SavingsChampion.co.uk. She has worked in the financial services industry for more than 20 years and for most of that time Anna has been helping people to make the most of their savings. SavingsChampion.co.uk is a no-nonsense, simple to use website that helps everyone to pick the best savings account for them and then, if they sign up for Rate Tracker, ensures that they could always be earning the best

Category: Finances
Keywords: savings, savers, interest rates, ISAs, savings rates, best buys saving mistakes