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You can find the current article at its original source at http://www.guardian.co.uk/money/2013/jul/21/fixed-rate-bonds-long-term-savings
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| Fixed-rate bonds no longer a haven for savers | Fixed-rate bonds no longer a haven for savers |
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| Savers relying on income from fixed-rate bonds face a shock when the deal comes to an end and they switch accounts, as rates have plummeted over the past year. | Savers relying on income from fixed-rate bonds face a shock when the deal comes to an end and they switch accounts, as rates have plummeted over the past year. |
| Interest rates slumped following the introduction of the government's funding for lending scheme in August 2012. The scheme gave savings providers access to cheap finance so they no longer needed to depend on savers' deposits to back home loans. | Interest rates slumped following the introduction of the government's funding for lending scheme in August 2012. The scheme gave savings providers access to cheap finance so they no longer needed to depend on savers' deposits to back home loans. |
| Sue Hannums, at Savings Champion, says: "Savers who took out a best-buy one-year fix last year will see rates drop from around 3.5% to 2%." | Sue Hannums, at Savings Champion, says: "Savers who took out a best-buy one-year fix last year will see rates drop from around 3.5% to 2%." |
| Worst hit are savers in long-term bonds. Someone coming to the end of a five-year bond paying 7% and picking today's best buy, at just 2.9% from FirstSave, will suffer an eye-watering fall in their income of £656 per year, or £55 per month, based on a £20,000 balance, according to MoneyComms. | Worst hit are savers in long-term bonds. Someone coming to the end of a five-year bond paying 7% and picking today's best buy, at just 2.9% from FirstSave, will suffer an eye-watering fall in their income of £656 per year, or £55 per month, based on a £20,000 balance, according to MoneyComms. |
| Research from HSBC last week revealed that 550,000 bonds will mature this month and a further half a million each month until the end of the year. | Research from HSBC last week revealed that 550,000 bonds will mature this month and a further half a million each month until the end of the year. |
| The key for savers is beating inflation to prevent a nest egg losing its real value over time. However, this is still almost impossible, with the consumer prices index – the government's preferred measure of price rises – having reached 2.9% in June. A basic-rate taxpayer will need to find a savings account paying 3.63%, while a higher-rate taxpayer needs to find one paying at least 4.83%, to combat the impact. | The key for savers is beating inflation to prevent a nest egg losing its real value over time. However, this is still almost impossible, with the consumer prices index – the government's preferred measure of price rises – having reached 2.9% in June. A basic-rate taxpayer will need to find a savings account paying 3.63%, while a higher-rate taxpayer needs to find one paying at least 4.83%, to combat the impact. |
| In the present economic climate, experts recommend that savers avoid tying up their money for more than two years, despite longer-term fixed-rate deals offering higher rates. | In the present economic climate, experts recommend that savers avoid tying up their money for more than two years, despite longer-term fixed-rate deals offering higher rates. |
| Hannums says: "Although five-year fixes offer some of the best rates for lump-sum investments on the market, it's still a long time to lock in while interest rates remain low, and you only need look back to see how much can change in that space of time." | Hannums says: "Although five-year fixes offer some of the best rates for lump-sum investments on the market, it's still a long time to lock in while interest rates remain low, and you only need look back to see how much can change in that space of time." |
| Kent Reliance building society tops the tables with rates of 2.05% and 2.35% on its one- and two-year fixes respectively. | Kent Reliance building society tops the tables with rates of 2.05% and 2.35% on its one- and two-year fixes respectively. |
| Andrew Hagger from MoneyComms adds that savers may be wise to opt for a variable account in case funds are needed quickly, enabling them to keep on top of the ever-changing market. | Andrew Hagger from MoneyComms adds that savers may be wise to opt for a variable account in case funds are needed quickly, enabling them to keep on top of the ever-changing market. |
| He says: "With a one-year bond paying just 0.3% more than the best-buy instant-access account, at 1.75%, what little you lose in interest you more than make up for in flexibility." | He says: "With a one-year bond paying just 0.3% more than the best-buy instant-access account, at 1.75%, what little you lose in interest you more than make up for in flexibility." |
| Top savings accounts | Top savings accounts |
| Yorkshire BS | Yorkshire BS |
| Teachers BS | |
| Coventry BS | Coventry BS |
| Powered by MoneySupermarket for the Guardian | Powered by MoneySupermarket for the Guardian |