Many savings providers are not telling customers when they cut the interest rates on their accounts, recent research by Which? has revealed.
Only four out of the 12 banks and building societies surveyed by the consumer champion guarantee to get in touch with customers to inform them of changes to their rates.
The survey highlights once again the importance of reviewing your savings accounts, and transferring your money if necessary.
The problem is, it's becoming increasingly difficult to beat inflation (currently sitting at 5% according to the Retail Price Index).
So it’s up to you to make sure your savings aren’t languishing in an account that pays little or no interest.
The Monetary Policy Committee’s decision to keep the Bank of England base rate at 0.5% (it has now been at this level for 18 consecutive months) is bad news for savers. “You’ve got accounts paying 0.1%. Three or four years ago you’d have thought nothing of an interest rate being 0.4 points below the base rate, but that’s because back in July 2005 the base rate was 4.75%,” explains David Black, banking specialist for data provider Defaqto.
Eventually, the base rate will have to rise again, but when is anyone’s guess, and it’s unlikely to make a significant leap. As Black says: “I’d be very surprised if it’s radically different at the end of the year.”
In the mean time here are five ways to make the most of your savings:
Keep a lookout for the most competitive rates. Interest rates on fixed-rated bonds range from 2% to 4.75%, but be aware of when the terms on your fixed-rate accounts come to an end and find new accounts to move your money into.
Questions to ask yourself
Think about how happy you are to take a little risk. Do you think you might need instant access to the money? If you can, try to put it away for a fixed period as this will usually get you a better rate.
Are you happy to invest in stocks and shares, or would you be scuppered if your investment fell in value? It's generally accepted you should have a secure rainy day fund before you look to invest your money, even if the returns are potentially much better.
Use your ISA
The annual cash ISA allowance is £5,100 (for tax year 2010/11) and savings on this are tax-free, so look to use it before other types of savings accounts. Beware of headline grabbing rates, however, which often include a bonus rate that runs out after 12 months.
Banks won't always make it easy for you to transfer ISAs and some of the best accounts available won't accept transfers. But last month the Office of Fair Trading ruled that ISA transfers should take a maximum of 15 days to complete, so the banks should be cleaning up their act.