Finance Choices
The savings market: more is less?
Britons in 2005 have more choice than ever before in how and where to deposit their savings, but the returns on offer are lower than the average of the last 45 years.
That is according to new research from Halifax, the UK's largest savings institution, which examined the "real" rate of return on savings accounts since 1960.
This was calculated by looking at the amount of money being earned on investments, and then subtracting the rate of inflation (how fast goods rise in price) for the year.
The research discovered that the 1980s was the best time to have money in the bank, with returns of 7.5 per cent, after inflation had been deducted, in 1986.
Savers in the 70s were stung the most, as the value of investments fell in real terms in eight of the decade's ten years. Things were at their worst in 1975 when raging inflation meant in real terms the value of savings fell 14.1 per cent in a year.
Overall savers have seen returns of 1.33 per cent ahead of inflation over the last 45 years, Halifax revealed, compared with 2004's rate of 0.9 per cent.
"The evidence suggests that savers have fared well during most of the last 40 years. What is very clear however, is that periods of high inflation eat into the real rates of returns that savers receive," said Cheryl Millington, head of savings at Halifax.
The bank pointed out that things really stared to pick up in the mid 1980s, after the building societies' "cartel" fell apart in October 1983 and new entrants to the savings market increased competition.
In the 1990s savings accounts operated by phone and post began to open up new channels of investment, and government action saw TESSAs (Tax Exempt Special Savings Accounts) introduced in April 1991.
1997 also saw large changes as Halifax, Alliance & Leicester, Woolwich, and Northern Rock converted from building societies to banks and the new Labour government introduced ISAs (the tax-free Individual Savings Accounts). The following year savings accounts operated over the internet began to appear.
Halifax points out that as a result of the changes in the 1990s, today's savers have more choice than at any time in history, it's just that the return from your savings aren't as good as in previous years.
Use our bank best buys table to find some of the best savings accounts available today.
That is according to new research from Halifax, the UK's largest savings institution, which examined the "real" rate of return on savings accounts since 1960.
This was calculated by looking at the amount of money being earned on investments, and then subtracting the rate of inflation (how fast goods rise in price) for the year.
The research discovered that the 1980s was the best time to have money in the bank, with returns of 7.5 per cent, after inflation had been deducted, in 1986.
Savers in the 70s were stung the most, as the value of investments fell in real terms in eight of the decade's ten years. Things were at their worst in 1975 when raging inflation meant in real terms the value of savings fell 14.1 per cent in a year.
Overall savers have seen returns of 1.33 per cent ahead of inflation over the last 45 years, Halifax revealed, compared with 2004's rate of 0.9 per cent.
"The evidence suggests that savers have fared well during most of the last 40 years. What is very clear however, is that periods of high inflation eat into the real rates of returns that savers receive," said Cheryl Millington, head of savings at Halifax.
The bank pointed out that things really stared to pick up in the mid 1980s, after the building societies' "cartel" fell apart in October 1983 and new entrants to the savings market increased competition.
In the 1990s savings accounts operated by phone and post began to open up new channels of investment, and government action saw TESSAs (Tax Exempt Special Savings Accounts) introduced in April 1991.
1997 also saw large changes as Halifax, Alliance & Leicester, Woolwich, and Northern Rock converted from building societies to banks and the new Labour government introduced ISAs (the tax-free Individual Savings Accounts). The following year savings accounts operated over the internet began to appear.
Halifax points out that as a result of the changes in the 1990s, today's savers have more choice than at any time in history, it's just that the return from your savings aren't as good as in previous years.
Use our bank best buys table to find some of the best savings accounts available today.
posted by Bruce Wayne at 2:17 PM
The savings market: more is less?
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