Time for a health check on your savings

5th January 2012

As a rule, the longer you are able to leave your offshore savings undisturbed, the higher the interest rate a bank can offer you

With good news on the UK economy still in short supply, many commentators are now saying UK Base Rates are likely to stay at their current low level for some time. That's great news if you have mortgage, but much harder if you rely upon your savings for income or are saving for a larger purchase, as many savings accounts link their return to UK Base Rate.

Moreover, at this time of the year, many of us will have returned from Christmas breaks and it won't be long before our thoughts turn to summer holiday budgets. For many, savings will need to be rebuilt for the next round of expenditure, but just how should you plan your savings with UK Base rate stuck at just 0.5%?

Most savers will want certain things from their bank such as reassurance on the safety of their accounts, an easily accessible branch for emergencies, good local service and of course attractive and reliable savings rates. Luckily, help is at hand with local savings banks such as Skipton International, part of Skipton Building Society, the UK fourth largest, which is based in Rohais, just next to Waitrose.

If you are saving for a holiday, the chances are you will want an account which offers easy access, where you can get at your money by giving a relatively short notice period to the bank. If your sights are set on a larger prize, perhaps you might be saving for a new car or even a house deposit, you will want a higher rate of interest, so your savings can grow more quickly. As you are saving over a longer period of time, you will probably be happy give up the need for regular access to capital, so you can plan around giving a longer notice period to the bank.

As a rule, the longer you are able to leave your savings undisturbed, the higher the interest rate a bank can offer you, so for example, a 120 day notice account will almost always offer a higher rate of return than a 40 day notice account ? put simply, you the customer are trading a higher rate of return for a different level of flexibility. Sometimes, banks will offer longer term bonds where the saver agrees to leave funds undisturbed for at least a year and so as you would expect, these will tend to offer even higher interest rate returns.

Your approach to planning your savings therefore needs to reflect your immediate and longer terms plans for spending and as with most things in life it makes sense not to put all your eggs in one basket. As we move into the New Year and the expectation of strain on all of our budgets, for many the answer will be to put some savings in an easy access account but to hold back as much as possible for those accounts paying higher interest which tend to have a longer notice periods.