Beat the banks: about the campaign
Walk into any high street bank and ask to see its savings rates and you'll be in for a shock. In today's low interest-rate environment, banks and building societies are paying peanuts to those who deposit cash.
The best easy-access account currently pays just 1.71% gross a year compared to inflation at 2.2% - and that's before taxpayers see a further slice taken by the taxman.
But those getting a rate of 1.71% are the lucky ones. There are some accounts paying hardly any interest at all, including many offered by well-known high street providers. At the time of writing, for example, Halifax's Liquid Gold account and HSBC's Flexible Saver both pay just 0.05% gross (which translates to 0.04% after basic- rate tax or a paltry 0.03% after higher-rate tax).
It means the vast majority of savers are failing to keep pace with inflation and seeing their cash decimated by the rising cost of living.
A sound financial future
But all is not lost. Even in this period of low interest rates, there is a huge discrepancy between the best and worst savings rate on the market - someone with £50,000 could lose out on as much as £800 if they pick the worst instead of the best account, according to savingschampion.co.uk.
Moreover, for those who can afford to take on more risk with their money, there are far better options out there. This is why we are launching the Moneywise Beat The Banks campaign.
We want to inform readers who are losing out to inferior savings rates about the alternatives, with the ultimate aim of helping Britain's families plan for a sound financial future.
Beat The Banks has three aims:
- To encourage readers with cash deposited in poor-paying savings accounts to switch to better-paying rivals
- To educate readers about alternatives such as peer-to-peer lending and property
- To inform readers with a longer timeframe for investing about the benefits of stockmarket investments
A better return on your money
You'll find any article that forms part of our campaign at our dedicated section on the website, moneywise.co.uk/beatthebanks, so keep checking back throughout 2014.
We've structured the campaign so there is a way for every type of person to get a better return on their money. For those who cannot afford to take any additional risk with their cash, we'll help them switch to a better-paying high street bank or building society.
For those who don't mind taking on a little more risk, we'll help investigate more adventurous income products such as those offered by peer-to-peer lenders and, in future issues, property.
For those with a longer timeframe who do not mind taking on additional risk, we'll present all you need to know about investing in the stockmarket.
With the latter in mind, it's worth noting the Moneywise message: we believe everyone should cut their costs and save money in order to invest it. By investing for the long term, families stand a greater chance of generating a decent return and being able to fulfil their financial goals.
The numbers speak for themselves: according to Fidelity Investments, if savers had invested £1,000 in the stockmarket's leading basket of shares - the FTSE All Share - during the 10 years to 1 November 2013, they'd be left with £2,356.73. This compares to £1,109.88 if they'd deposited their £1,000 in the average high street cash savings account.
But people who invest in the stockmarket must usually do so for the medium-to-long-term, with independent financial advisers generally recommending a period of at least 10 years. This is in order to minimise risk. To further help reduce risk, a sensible investor will usually construct a diversified portfolio that is spread among a number of different types of investment.
Don't settle for less – Beat The Banks by switching, saving and investing at moneywise.co.uk/beatthebanks. Tell us when you've beaten the banks on Twitter by tweeting us at @Moneywiseonline, including the hashtag #beatthebanks.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.