Achieving the best savings interest rate in a bad economy can be a challenge. With the Bank of England setting base rates at an historic low of just 0.5%, financial institutions aren’t rushing to offer savers a huge return. Don’t settle for the financial products or they’ll have no incentive to improve. Those who are able to avoid an early withdrawal penalty, should see if they can improve their returns elsewhere.
Best Savings Interest Rate
Whilst a high bank account savings rate is something of a misnomer, it is certainly possible to get improved returns. Don’t leave money earning 0.1% in a current account or personal savings won’t even keep pace with the rate of inflation. Fully utilise personal tax allowance, take advantage of tax-free savings and compare savings rates with an online comparison service.
Personal Tax Allowance
Every UK resident has a personal allowance of £6,475 for the 2009/2010 tax year. Bank account savings rate will generate an income that counts towards this allowance. Should it have been fully utilised, it is possible to reduce taxable income by transferring savings and investments into a partner or family members name so that their allowance is used instead.
Tax avoidance is an important technique for those looking for the best savings interest rate. There are National Savings Investments and Individual Savings Accounts that are specifically designed to help achieve this objective. It is possible to get a more favourable cash ISA interest rate relative to a normal savings because no taxation is paid. From April 6th 2010, up to £5,100 can be placed in a cash ISA.
Compare Savings Rates
Don’t accept that the best savings interest rate is the one offered by the current bank. Use a comparison site, such as moneysupermarket.com, to trawl through the many different financial institutions for the best bank account savings rate. Provided that there isn’t a penalty for early withdrawal, transfer the balance across to the account offering customers a more favourable rate of interest.
Unless a non tax payer, those seeking the best savings interest rate should seek to utilise their tax-free savings first. Once this allowance has been fully utilised, take advantage of the personal allowance of a trusted partner or family member. Compare savings rates online regularly. Provided that they aren’t held in a notice account, move them to where the bank account savings rate is the highest. Should a saver be seeking a better return, consider a stocks and shares ISA investment.