Britons urged to consider option which ‘maximises’ savings as interest rates increase | Personal Finance | Finance
The Bank of England hiked interest rates from 1.25 percent to 1.75 percent. Although very much behind the inflation rate, it’s important for savers to know what this could mean for their money.
Express.co.uk spoke exclusively to Les Cameron, savings expert at M&G Wealth on the base rate rise.
He explained what this means for pensioners, and how they may be able to stop their money from eroding.
Mr Cameron did not think that the interest rate rise came as a real shock to anyone.
He said: “As inflation continues to rise, increases in savings rates mean that, for the majority of cash or near-cash savers, for example National Savings & Investments, their money is being eroded in real terms.
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“Many of those with cash savings are pensioners, who spend a higher proportion of their savings on energy bills and are likely to feel the effects considering the sky-high energy prices.”
Households are being warned that their annual energy bills could soar in the coming months.
Ofgem is expected to announce an increase to its October price cap next week which could see energy bills reach an astonishing £3,582 a year for average households.
As the cost of living crisis continues, Britons are urged to make sure they are receiving all the help they can get, especially pensioners.
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He continued: “With the soaring cost-of-living factored in, the erosion is going take a bigger toll on people’s savings, and those repaying debt which is not on a fixed rate are likely to feel the brunt of the rises more than others.
“Staring down the barrel of potential double-digit inflation means reviewing your finances and ensuring your savings can weather future challenges is now more important than ever.
“Seeking professional financial advice can be the best place to star.”
Inflation is currently 10.1 percent however experts warn by October, the poorest fifth will experience inflation of 17.6 percent while the richest will see a rate of 10.9 percent, according to the Institute for Fiscal Studies (IFS).
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“It’s not as complicated as you may think and, with a variety of investments, you can spread the risk.
“Speaking to a financial adviser is always a wise choice and can ensure any investment choices are tailored to suit your circumstances.
“Those approaching retirement, could consider maximising pension contributions as the tax relief generates a return.
“For example, for basic rate taxpayers who put £80 in their pension, the Government will top it up to £100.
“After getting £25 of this tax free and paying 20 percent tax on the remaining £75 you have £85 – this is a 6.25 percent return. It might not beat inflation, but it does beat the bank.”
