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5 savings tips for a low interest rate environment

Low interest rates doesn’t mean you should leave your savings sitting idly by. Here are 5 tips to get your savings working hard.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Recent headlines have made bleak reading for savers. The Bank of England’s emergency move to slash the base rate back to historic lows of 0.25% has made it even more difficult to get a good return on your cash – savings rates are likely to fall from current levels.

But that’s no reason to sit on your hands. Making the most of your savings is easy with these 5 tips.

1. Check your rates

Our recent survey showed that nearly half of people don’t know the rate they’re getting on their savings, so the first step could be an easy one.

The average instant access rate is just 0.41% including unconditional bonuses. But rates on the high street are as low as 0.1%.

Don’t settle for paltry returns. There are much better rates available. You can get nearly three times the average easy access rate through Active Savings. On a savings pot of £35,000 that’s £276.50 more per year. Rates are variable and can change.

Instant access savings accounts from high street banks and building societies typically let you instantly withdraw your money at any time. With Active Savings, withdrawals from the easy access products usually take up to one working day.

2. Watch out for bonus rates

Some banks will offer an introductory bonus rate when you sign up for a new account. This will usually be available for a period of up to a year, after which the bonus will end and your rate will drop, sometimes significantly.

While these accounts could at first offer you a better rate, you do need to treat them with caution.

Unless you’ll remember to move your money when the bonus ends it might be worth looking at accounts which pay a slightly lower headline rate, but instead pay a good consistent rate.

3. Fix to boost your savings

Fixed term savings could really help boost your returns. You won’t usually have access to your money until the product matures, but you’ll often get a much better rate than easy or instant access accounts. It’s best used for money you won’t need immediately.

You can normally fix from just three months, and the longer you fix for, the higher the interest rate usually is. For example, you can currently get as much as 1.53% AER* (1.55% Gross ) on a three-year fix through Active Savings.

Remember that inflation reduces the future spending power of cash.

4. Make the most of your personal savings allowance

Untouched by the recent Budget, the personal savings allowance (PSA) lets lots of people earn up to £1,000 of interest each tax year before they pay any tax.

Your individual allowance will depend on your tax rate. For example, higher rate tax payers get £500 and additional rate tax payers don’t get a PSA at all. Nonetheless it means that lots of savers don’t have to worry about paying any tax on their savings interest.

Remember if you’re married or in a civil partnership you could split your savings with your spouse to effectively have a combined PSA of up to £2,000.

The personal savings allowance is calculated using UK, not Scottish, income tax bands. Tax rules can change and benefits depend on personal circumstances.

5. Ladder your cash to become a savvy saver

If you want to maximise your returns, but still want regular access to your money, you could consider multiple fixed term products with different end dates.

You’ll probably get a much better rate than simply leaving it in an easy or instant access account, and you can time your cash to come back when you think you’ll need it.

Find out more about Active Savings

Make more of your cash with Active Savings

If you’re looking to make more of your cash savings, Active Savings could help.

It lets you pick and mix easy access and fixed-term savings products from a range of different banks and building societies, all through the convenience of one online account.

And once you’re set up you can move your money around with just a few clicks. There are no forms, no paperwork and no hidden surprises. Just simple, fair saving so you always know what rates you’re getting.

Discover Active Savings

This article and Active Savings aim to help you make more of your money but they’re not personal advice. If you’re at all unsure, please seek advice. Products on Active Savings can be added or withdrawn at any time.

*AER (Annual Equivalent Rate) shows what the interest rate would be if interest was paid and compounded once each year. It helps you compare the interest rates on different savings products.

Gross means the interest rate without any tax deducted. Interest is paid gross. You are responsible for paying any tax due on interest that exceeds your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017 with firm reference 751996 for the provision of payment services. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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