– rather than interest in UK bank accounts: here’s what you can do about it with careful financial planning
According to a recent This Is Money report, an estimated £215 billion is sat in UK bank accounts earning no interest, with a 30% chance of a rate cut this year. If your savings are part of this statistic, good financial management should be the answer.
Money markets are poised for significant cuts to interest rates in the coming months. Latest estimates suggest that there’s a 30% chance of interest rates being slashed from their record low of 0.1% at some point in 2021. This has occurred while record amounts of cash sits in bank accounts paying no interest at all.
While the last minute dodge of a no-deal Brexit may have eased the sense of impending doom that many were talking about in December, few are expecting interest rates to get any higher this year in the wake of the split from the EU and the COVID-19 pandemic.
Reports from This Is Money state that there is a 70% chance that interest rates will stay exactly as they are this year, but that leaves a 30% chance that they will get even lower. This is a dose of bad news for those looking to make the most of lockdown savings or be more proactive in their wealth management in 2021.
Lockdown has created accidental savers who aren’t making the most of their new assets
For those who have been lucky enough to keep their jobs during the pandemic, saving has become more achievable as lockdown has provided few opportunities for holidays, nights out and social events.
Because of this, a record £215 billion was thought to be lying dormant in instant access accounts at the end of October, according to the latest available figures from the Bank of England.
More than £150 billion was saved into cash accounts in 2020, including £41.8 billion in NS&I in the year up to 30th September. In some months, savings were more than triple those of 2019. In June 2019, £25 billion was saved in cumulative household deposits, while in June 2020, this number skyrocketed to £79 billion.
But these instant access accounts pay little or no interest and, without interest, this money isn’t working hard for people.
Interest rates could be cut even further than their current record low
When the Bank of England cut interest rates to the emergency level of 0.5% back in 2009, few of us could have imagined that more than a decade later, rates would be considerably lower than even this, and that we’d be contemplating the risk of a potential further fall.
Market prices suggest that rates will continue to be low throughout this year. As for whether we can expect to see rates fall further or remain stagnant, it largely depends on how the global economy evolves over the next few months, and whether we will see a strong recovery from the pandemic.
In light of this uncertainty, it is prudent for those with savings or investment ambitions to put some time into careful financial planning as we enter into 2021. With the economic landscape so tumultuous, it’s more important than ever to put the correct wealth management service in place.
If you are unsure what to do with your savings transparent IndependentFfinancial Aadvice can give you both clarity and peace of mind when it comes to managing your money, so get in touch with the team at Carrick Financial Management today. Our financial planning services will help you get to grips with your finances and make smart investments in your future.