Beating the banks

So the pain-in-the-ass high street banks decided to scrap interest on their current accounts altogether.

And yip, we know it’s small loss for customers who have in the past year been getting little over 0.1 per cent on these accounts, but with the bank rate remaining unchanged at 0.5 per cent for 19 months now (this is the longest period since the Second World War) we have to make a plan.

Maike Currie, deputy personal finance editor of the Investors Chronicle in London, says the need to secure a decent rate on your savings account and cash individual savings account (Isa) remains as crucial – if not more crucial – as ever.  So taking a good look at the shape of the UK's savings landscape, and examining what the market is currently offering, can be not only revealing, but crucial if you are serious about your hard-earned cash.

Move your cash now

NatWest and RBS have both stopped paying credit interest on current accounts, while Santander has stopped paying interest on selected current accounts and halted payments on other accounts with a balance of over £2,500. This means that about 55 per cent of current accounts on the market pay no interest, while a further 28 per cent are paying 0.10 per cent or less.

If you have a lot of money in any of these accounts, you should move it to an account where your money will work for you – like a savings account. Regular savings accounts now offer some of the best rates in the market, although most of these come with strict terms like locking op your cash for a fixed term.

Top regular savings accounts
 
If the maximum investment amounts on the best regular savings accounts available are too constraining, you could consider a savings account paying an introductory bonus. But tread carefully with these accounts - while bonuses may boost the initial rate, these only run for a limited period, and given that they account for a large part of the overall rate, once the bonus period expires, the rate will drop considerably.

Inflation proof your cash

The latest Consumer Price Index (CPI) data for the UK shows that headline inflation is remaining high at 3.1 per cent for the year to the end of September. Inflation is the enemy of savings as it eats away at the value of your cash. According to Moneyfacts.co.uk, the lack of movement in the inflation rate means a basic rate tax payer now needs to find a savings account paying 3.88 per cent in order to stop their savings pot effectively eroding away. Higher rate taxpayers have the task of finding an account which pays 5.17 per cent, of which there are 55 available, according to Moneyfacts.

For basic rate tax payers, there are 118 savings accounts available which would safeguard their savings against inflation. Among these are the State Bank of India's Four Year Fixed Rate Bond paying 4.20 per cent and Northern Rock's Five Year Bond paying 4.15 per cent. The three year bonds on offer from SAGA and Halifax, both of which pay 4.00 per cent, would also do the job.