Younger savers can be forgiven for casting an envious glance towards their older counterparts, who can now open Pensioner Bonds paying interest rates well in excess of accounts available elsewhere.
So if you are under 65, perhaps only by a few months, and you can’t get the great interest rates offered by Pensioner Bonds, how can you give your savings a boost?
Here are six ideas for you.
#1: Cash ISAs, use it or lose it!
Simply put a Cash ISA is just like a normal savings account except the interest isn’t taxed.
Less tax means a better return for you!
Anyone over the age of 16 can put up to £15,000 into a Cash ISA each year; that’s enough to meet the savings needs of most people. Make sure you use your Cash ISA allowance each year though, even if it’s just a case of moving money from other savings accounts; if you don’t use it you’ll lose it, which will mean paying unnecessary tax.
#2: Move money to be tax-efficient
Many couples hold their savings jointly, but this can be a mistake if you pay different rates of tax.
Savings should be held in the name of the lowest rate tax-payer to minimise the amount of tax deducted. For example, if one of you pays 40% tax, whilst the other pays 20%, then the savings should be held in the name of the basic rate taxpayer to avoid paying higher rate tax on the interest.
#3: Non-taxpayers don’t pay tax on their savings
If you are a non-taxpayer you shouldn’t be paying tax on the interest you receive from your savings, unless of course the amount is sufficient to take your income above the Personal Allowance (the amount you can earn before you start to pay tax).
With many accounts you can complete an R85 form, available from your bank or building society, to get the interest paid gross with no tax deducted.
Again, less tax means a better return for you.
#4: Fixed rates for a better rate
Although you probably won’t be able to match the interest rates offered by Pensioner Bonds, taking out a fixed rate bond will probably get you a better rate than leaving your savings in an instant access account.
As a general rule the longer you are prepared to tie up your savings, the better the rate of interest.
Two words of warning though. Firstly, most fixed rate bonds don’t allow early access and if they do a penalty will usually be payable. Secondly, be careful not to tie up your money for too long, you wouldn’t want to be left stranded in an uncompetitive account when (and if!) interest rates start to rise.
#5: Consider Peer to Peer lending as an alternative
With interest rates so low, Peer to Peer lending, which can pay higher interest rates than a savings account, has grown in popularity. But it isn’t saving, it’s investing and carries far greater risk than a traditional savings account.
Peer to Peer websites match lenders and borrowers, who are either individuals or businesses. A lender will commit their capital, which will then be lent out to a large number of individuals or businesses.
The return you get is based on a number of factors, including the interest rate charged to borrowers, the fees you pay and the rate of defaults, when people or businesses fail to make repayments.
Peer to Peer lending isn’t the same as a traditional bank account. If the company you select goes bust you won’t get the same protection from the Financial Services Compensation Scheme (FSCS) and some or all of your capital could be at risk. Furthermore if borrowers default you might not get all your capital back.
However, for more intrepid savers it is an option which is worth considering.
#6: Shop around
A recent report by the Financial Conduct Authority (FCA) showed that millions of savers were getting poor interest rates simply because they weren’t shopping around.
With interest rates so low and the huge amount of information available on the internet, it has never been easier and more important to shop around.
If you haven’t reviewed your savings for a while move the job to the top of your to do list; not doing so could be costing you money.
We’re here to help
If your savings need a boost our advisers are here to help.
Call us today on 0115 933 8433 or email firstname.lastname@example.org and we’ll talk you through your options.