Haven’t savers suffered enough? The Funding for Lending Scheme (FLS) has already had a disastrous impact on savings rates since its introduction in August 2012. The announcement today that there will be an extension to the scheme until January 2015, will just exacerbate the problem.

The FLS was launched to help borrowers in these tough times but it had a devastating knock on effect for savers. The appetite for raising money from savers has all but disappeared, and this has been reflected in the interest rates being offered.

The rates available on the Best Buy easy access accounts have fallen by 38% since last summer, from 3.25% AER to around 2% AER – so for those who depend on their interest to supplement their income it will be a real shock when shopping around for a new home for their savings.

Those with fixed rate bonds coming to an end will see an instant drop in their income. The best 1 year fixed rate bond was offering 3.30% a year ago – which would mean interest of £3,300 a year before tax on an investment of £100,000. Today, the best rate is 2.25% – a drop of 32% – and in income terms that is a drop of £1,050 a year (before tax)!

By extending the FLS it’s likely that providers will continue to display little to no desire to raise deposits from savers; and with inflation above target and expected to rise this year, there is certainly no light at the end of this tunnel for the beleaguered saver. It looks as though the FLS is going be a cross for savers to bear for quite some time.

Those who have done the right thing and prepared for their future by saving have been hammered and now there is little incentive for future generations to save; what message does this send out and what mess will we have to fix in years to come.

So what’s the advice in all this doom and gloom? Ironically, at a time when it’s the least appealing, the advice is to keep saving; everyone needs to keep accessible money in a cash account. However it’s never been so important to ensure you’re getting the best rates as simply so few even beat inflation. Use your ISA allowance, if you’re a tax payer, and even if you’re not, you’d possibly get better rates on an ISA than you might on a standard savings account anyway. Don’t leave you money languishing in a poor paying savings account, you can’t afford to.