The Independent’s Personal Finance Editor Simon Read talks over the latest Money news.
This week good news for savers, pensioner bonds, basic bank accounts and energy-saving at Christmas
Good news for savers
There’s good news for savers today: the Consumer Price Index – the official measure of inflation – has fallen to one per cent, its lowest rate in 12 years.
It means that three-quarters - 155 out of 201 - ISAs now offer rates that beat inflation, according to figures from Moneyfacts.
To beat inflation, a basic rate taxpayer at 20 per cent now needs to find a savings account paying 1.25 per cent, while a higher rate taxpayer at 40 per cent needs to find an account paying at least 1.67 per cent.
Of the 632 non-ISA accounts in the market today, there are 210 that basic rate taxpayers can choose to negate the effects of tax and inflation.
The news should send savers running to check their account. If they’re not getting inflation-beating interest, then it’s time to change accounts. And, for the first time in ages, there are plenty of alternatives.
Last week the Treasury announced the rates for the new pensioner bonds, announced in March’s budget, which will be issued by the government-backed National Savings & Investments in January.
The one-year bond will pay 2.8 per cent while the three-year bond four per cent. The rates are much better than any other savings accounts currently available on the market.
“The rates are head and shoulders above the nearest competition, paying 51 per cent more than the average top five one-year fixed rate, and 61 per cent more than the average top five three year fixed rate,” said Anna Bowes of SavingsChampion.co.uk.
But only those aged 65 and over will be allowed to invest in the bonds. The most you’ll be allowed to save will be £10,000, but you can put that much in in each bond, meaning pensioners can stash £20,000 each in the high-paying accounts.
Basic bank accounts
A new style of basic bank account is to be launched through the high street banks next year after a deal was agreed with the Treasury. Basic accounts were launched around a decade ago to help those who normally don’t qualify for an account. They don’t offer overdrafts or cheque books and are free to the users.
But some hard-up people have been hit by unexpected charges for bounced payments which, at £30 or more, have then put them into financial difficulty. Under the new agreement the fees will be scrapped.
Andrea Leadsom, Economic Secretary to the Treasury, said the deal would give “certainty and clarity and end people being effectively locked out of their basic bank accounts due to high fees and charges when their payments failed”.
More than three million adults are expected to switch off their heating to save money on energy bills, according to research by social landlord Circle Housing.
On top of that, 1.5 million say that they intend to turn to credit or a payday loan just to cover their energy costs this Christmas.
Helen Wilson, of Circle Housing, said: “There are a high number of people resorting to drastic measures such as payday lenders or turning their heating off so that they can afford their energy bills.
“Anybody who is worried should get advice about ways to save on bills and to contact their energy supplier if they are worried about getting into debt.”
Simple ways to save money include turning the temperature down by only one degree or ensuring appliances are not left on standby.