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UK inflation falling – what’s next for savings rates and annuities in 2024?

UK inflation is nearing its target, but there’s still no certainty about the Bank of England rate cut. We look at what effect this has on savings rates and annuities.
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Important information - 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.

Inflation fell to 2.30% in April. It’s lowest level since July 2021, and only just short of the government’s 2% target.

But while the hot mess of inflation has cooled, it’s still not quite at the perfect temperature.

The Bank of England will want to see more signs that inflation is under control before cutting interest rates. It’s expected that a rate cut might not now come until August, or even later.

Savings and annuities providers will be watching closely. And some could already be starting to act. So, how can savers get the most out of their cash in 2024?

This article isn’t personal advice. If you’re not sure if an action is right for you, seek advice.

Savings rates are still beating inflation

It’s important to stay ahead of inflation with your savings as it reduces the real term spending power of your money.

But the good news is it’s getting even easier. There’s now lots of rates in the savings market that beat 2.30% at the moment.

The bad news is that the best easy-access deals are highly unlikely to last.

Easy-access rates have been dropping across the board – a sign that banks are gearing up for a rate cut later this year.

When one or two of these banks start to cut rates, the rest tend to swiftly follow. The writing is on the wall for the 5% easy-access rate.

There’s still a good opportunity for fixed-rate savings

For those looking to fix their rate, there’s still some great deals around, including some over 5%.

If you don’t need the money for any short-term commitments, it makes sense to consider fixing now. Unless expectations change significantly, we’re unlikely to see any big increases in fixed rates.

Finding a competitive fixed rate now means you can lock in that rate regardless of potential Bank of England cuts this year.

Just make sure you have access to your emergency savings before fixing, as you usually can’t withdraw from a fixed rate until the term ends.

Want your cash to work harder?

If you’re dreading the thought of searching for the best rates, or struggling to keep on top of savings accounts you have, our Active Savings platform could help. You can access great rates, from multiple banks, all through one online account.

Take a look at Active Savings and get money back with our new cashback offer. Terms apply.

What does falling inflation and potential rate cuts mean for annuities?

It looks like the days of soaring annuity incomes are behind us. But they’re still good value.

A 65-year-old with a £100,000 pension can get up to £7,117 a year. That’s based on a single life annuity guaranteed for five years, and with no increase.

This is below the £7,586 highs of October 2022, but much higher than the £6,782 you would’ve got just a year ago.

With interest rates expected to hold, things should remain very much as they are. But when the rate cut does come, we could well see annuity rates fall. Of course, nothing is guaranteed though.

It’s important to remember that interest rates aren’t the only thing affecting available annuity rates.

By providing more details to an annuity provider, like disclosing any health conditions, it can increase the amount of income it pays.

That’s why shopping around is so important. The difference between providers can work out at hundreds of pounds a year – over the course of a retirement, this can add up to thousands.

See what you could get with our annuity quote tool.

Remember, what you do with your pension is an important decision that you might not be able to change. You should check you’re making the right decision for your circumstances and that you understand all your options and their risks.

The government's free and impartial Pension Wise service can help you and we can offer you retirement advice if you'd like it.

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Written by
Guy James
Guy James
Personal Finance Writer

Guy is a savings specialist, passionate about encouraging people to get to grips with their cash. An integral part of our Active Savings team, he aims to help as many people as possible secure their financial safety net, and make more of their cash.

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Article history
Published: 7th June 2024