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The Bank of England is counting on your lockdown savings to boost the economy

We look at what comments from the latest Bank of England meeting could mean for savers and offer five tips to make more of your lockdown savings.

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.

The pandemic has shifted us from being a nation of borrowers to a nation of savers.

In the last 12 months alone, we’ve squirreled away £184bn, while at the same time paying off £18.8bn of debt on things like credit cards and loans. That compares to £68bn in savings the year before and increasing our borrowing by £8bn.

Household savings and borrowing

Source: Bank of England

But the winds are beginning to change. The economy is starting to open up. And the latest Bank of England report gave a rosy forecast for the economy, expecting it to grow at the fastest rate in over 70 years.

A key part of this is the hope that savers use 10% of their lockdown savings, as much as £18bn, to boost consumer spending over the next three years.

While lots of us might have earmarked our savings for something in particular, you shouldn’t forget the extra financial resilience that comes with having a cushion of cash.

Wondering what to do with your lockdown savings? Here are five simple tips to help you get more from your cash.

This article gives information to help you improve your finances but isn’t personal advice. If you’re not sure what’s right for you seek advice.

1. Find out what rate you’re getting

Cuts have been brutal over the past year and lots of people don’t know what they’re currently earning. You could be in for a surprise.

Most big high street banks pay a pittance – as little as 0.01% on instant access accounts. And if you have a fixed term savings account ending soon, you’ll probably struggle to get a comparable deal with the same provider.

If you’ve saved with the same bank for years, you might now be on a ‘standard savings’ type of account which usually earns next to nothing.

Savings rates have risen lately, with a number of banks battling to be at the top of the ‘best rates’ tables and competing for your money. There could be better deals out there if you’re prepared to look around.

Waiting for a great rate? Sign up to our alerts and you’ll be one of the first to know when great rates are added to Active Savings.

Sign up now

2. Don’t forget your emergency fund

We all need money set aside to cover the unexpected. We think you should have at least three to six months of essential expenses if you’re working. If you’re retired, you should consider one to three years’ worth. It’s more than working people because if you need to dip into your pot, it could take longer to top it back up again.

There’s not much point building up an emergency savings pot if you can’t access it when you need it. That’s why it makes sense to look at easy or instant access savings accounts.

Holding this money in a savings account rather than your current account means it’s ringfenced. That way, you won’t be tempted to go shopping with it or get it mixed up with your day-to-day spending.

Find out more about how much to hold and where to keep it

3. Consider when you’ll need access to your savings

The vast majority of savings are held in instant access accounts. That’s not surprising given how uncertain things have been. Instant access accounts give you immediate access to your money, but in return tend to pay the lowest rates. Now could be a good time to think about how your savings are split and whether you need immediate access to all of it.

If you don’t, consider fixed term savings products. Fixed terms will usually pay you a better rate than instant access in return for locking your money away for a period of time.

You don’t need to tie your money up for long, but it will depend on the bank or building society you choose. Big high street banks typically offer a very limited range.

Usually, the longer you fix for, the better the rate. If you’re really savvy, you can choose multiple fixed terms of different lengths. That way you’ll have money coming back to you at regular intervals, while boosting your overall rate. With fixed term rates you can’t usually access your money until the end of the term.

Read more on how to build your own bespoke cash strategy

4. Look further than your high street bank

The most popular place to go when searching for new savings accounts is the same bank you have your current account with. But as we know, they usually pay miserable rates.

The truth is, most big banks don’t need your savings right now, so they offer rock-bottom returns. But some banks do need your cash and offer much better rates to get it. These are usually smaller ‘challenger’ banks.

We normally choose our high street bank because we’re familiar with them and trust them. But smaller banks also need to jump through lots of hoops to get authorised by the Financial Conduct Authority and Prudential Regulation Authority. This includes regularly demonstrating that they’re stable and hold enough capital.

Smaller banks also benefit from the same level of protection from the Financial Services Compensation Scheme (FSCS) as big banks do. The FSCS covers up to £85,000 of eligible deposits per banking licence in the unlikely event that a bank stops trading.

More on the FSCS

5. Try Active Savings

Active Savings makes it easy to get more from your cash. Pick and mix a range of savings products from different banks and building societies, all under one roof. Choose easy access or fixed term products starting at just six months up to five years.

Your money will be held by the banks you choose, but you’ll manage everything together in one online account. If you have other HL accounts, you’ll see your savings alongside your investments, giving you a clearer view of your money.


The best rates on Active Savings

Easy access

Up to
1.10% | 1.09%
(AER | Gross)

Avg. market rate
0.31%

1 year

Up to
2.90% | 2.90%
(AER | Gross)

Avg. market rate
1.01%

2 years

Up to
3.20% | 3.20%
(AER | Gross)

Avg. market rate
1.65%

3 years

Up to
3.20% | 3.20%
(AER | Gross)

Avg. market rate
2.04%

Easy access

Up to
1.10% | 1.09%
(AER | Gross)

Avg. market rate
0.31%

1 year

Up to
2.90% | 2.90%
(AER | Gross)

Avg. market rate
1.01%

3 years

Up to
3.20% | 3.20%
(AER | Gross)

Avg. market rate
2.04%

Find out more

Please note the products above are some of our most popular, but more are available. Click the link above to see our full range. Products can be added or withdrawn at any time. Minimum deposit requirements apply to individual products. Easy access products pay a variable rate and fixed term products pay a fixed rate.

Source: Bank of England 30 June 2022. Comparisons with average market rates for easy access products are based on instant access products, which allow immediate withdrawals. Active Savings offers easy access products and withdrawals usually take one working day.

AER (Annual Equivalent Rate) shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products. Once you have opened a fixed term product the rate won't change, but rates on easy access products can vary.

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

The savings of private individuals held with authorised banks and building societies are covered under FSCS. All of our partner banks are authorised by the Prudential Regulation Authority (PRA) and covered under FSCS.

High street banks offer instant access products which provide immediate access to your money. The Active Savings Service offers easy access products and withdrawals usually take one working day. Please remember that inflation reduces the future spending power of money.

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

Gross – the interest rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

Expected profit rate (EPR): Islamic banks offer an expected profit rate rather than interest on their savings products in order to comply with Sharia banking principles.

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 Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.


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    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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