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09 Oct 2013

Savers Should Get Creative As Returns From Savings Drop

Britons who are saving into cash accounts are facing undesirable returns this year, with the average one-year fixed-rate bond paying only 1.56%, according to new figures released by the Bank of England.

This means that, at present, savers whose fixed deals are approaching maturity will have to settle with 40% less to get a similar account. Effectively, income from £20,000 would drop by approximately £190 before tax per year. According to the Daily Telegraph, the situation has worsened to the extent that rates of a number of everyday current accounts are higher than rates for savings accounts.

Most experts agree that in order to beat the odds and boost their savings, savers will have to think outside the box and be inventive. However, with creativity comes risk, but if savers are willing to take chances, there are several options they can consider.

First of all, savers are advised to optimise their savings and make sure they are as efficient as possible. For example, savers should use the full £5,760 cash Isa allowance. Also, if their spouse is entitled to lower income tax, the savings could be transferred to them, the Daily Telegraph said.

Another possibility to boost income is through peer-to-peer lenders, where consumers borrow money from other consumers, avoiding paying out interest to a bank. Buying retail bonds is also an option, as interest rates are decent, reported at between 5% and 7%.

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