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No savings graces

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Savings rates are being cut again and consumers are not best pleased, as Mike Collins finds out

Despite the Bank Base Rate having remained at 4.5% since last August, many savings providers have been cutting the interest rates payable on their accounts, much to the consternation of people who were lured into opening one by the promise of good rates. Providers that have cut their rates recently, in some cases by up to 0.25%, include Nationwide, Abbey and Yorkshire Bank.

”I opened an account with a big High Street company which was paying me 4.75% this time last year,” says Julie Westwood, a mother of three from Frimley in Surrey. “However, that has been cut 1% since then and I must admit I feel that I’ve been conned. They’re glad to reel you in with tasty headline rates when the accounts are launched, but I’m far from impressed with their longer term behaviour. I wanted to make some interest to treat the kids at Christmas, but it hasn’t worked out like that.”

Financial expert Martin Cunningham shares Westwood’s reservations. “A lot of High Street accounts pay less than 1.2% after 20% savings tax, and at this rate the value of your money is being badly eroded by inflation, which is currently running at 2.4%.”

He continues: “To make any real gains you need to find an account that is paying at least this amount after tax, which is 3% before tax, to retain the spending power of your savings. The only answer is to shop around and avoid the real stinkers, of which there are plenty, believe me.”

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