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Interest rates likely to fall even if the UK avoids a no-deal Brexit

How savers can protect their money from a rate cut and boost overall returns

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 bad news for savers continues.

Bank of England (BoE) policymaker Michael Saunders has said the Bank of England is considering cutting interest rates, even if the UK avoids a no-deal Brexit.

This is a stark turnaround for one of the BoE’s most hawkish policy makers – who generally favour relatively high interest rates in order to keep inflation in check.

It might be unwelcome news for cash savers, but Saunders’ comments simply confirm what was already expected. The financial markets are predicting a 64% chance of a cut by the middle of next year.

The good news for savers is that there are ways to protect your money from a rate cut and to boost your overall returns. We take a look at two options.

This article isn’t personal advice, if you’re not sure what to do please seek advice.

Short-term savings

Fixed-term savings can protect you from future cuts. If you fix now, your rate won’t change even if interest rates fall. Through Active Savings, you can currently get 1.8% AER/Gross* on a one year fix (correct as at 30 September 2019).

There are also other fixed terms and an easy access product to choose from. You can create a savings portfolio that fixes some of your cash to protect against falling interest rates, while keeping some accessible for emergencies.

You can only take money out of fixed-term products at maturity. Inflation reduces the future spending power of money.

Discover Active Savings

Longer-term savings

For money you don’t expect to need in the next five years, for example long-term savings in Cash ISAs, the stock market could be an option for those who are willing to accept the risks of investing.

In fact, a recent independent survey found poor Cash ISA returns was the number one reason why people started investing in the stock market.

And it’s easy to see why, when you look at the difference in historical returns between the stock market and Cash ISAs.

Since the end of 2010 the UK stock market returned over 77% growth compared to 11.6% for the average Cash ISA. Past performance is not a guide to the future.

It’s important to remember that unlike the security of cash, investment growth is not guaranteed. Your investments can fall as well as rise in value so you could get back less than you put in.

Value of £1,000 in the UK stock market vs average Cash ISA

Scroll across to see the full chart.

Past performance is not a guide to future returns. Source Lipper and Bank of England, correct as at 5 September 2019.

How to transfer a Cash ISA to a Stocks and Shares ISA

If you’re comfortable taking on more risk, transferring Cash ISAs to a Stocks and Shares ISA and investing in the stock market is quick and easy. We’ll do all the hard work for you.

You won’t lose your ISA wrapper. And transferring Cash ISAs opened over previous tax years won’t count towards your ISA allowance for this tax year. If you decide in future that you would like to switch back to a Cash ISA, this is possible.

Tax rules can change and benefits depend on personal circumstances.

Once you’ve read our terms and conditions (including tariff of charges), key features and important investment notes, and checked you will benefit and won’t incur excessive exit penalties, all you need to do is:

  1. Download and complete a simple transfer form
  2. Return it to us and we'll take care of the rest of the transfer and keep you updated

If you know where you’d like to invest the cash once your transfer completes you can provide investment instructions on the transfer form. Alternatively, you can wait until your transfer is complete before deciding.

FIND OUT MORE ABOUT OUR STOCKS and SHARES ISA AND HOW TO TRANSFER

*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.

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.

Rates may be subject to change and depend on individual circumstances.

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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