There could be major changes affecting savers in the Budget
A banking expert has called on savers to ensure they’re securing the best possible rate ahead of the upcoming Autumn Budget. Speculation suggests Chancellor Rachel Reeves may introduce reforms to savings policies, potentially introducing a new limit on ISA cash holdings.
In anticipation of potential changes, experts at savings platform Plum are encouraging people to compare the rates currently available on the market. Rajan Lakhani, personal finance expert and head of money at savings app Plum, said: “It’s important for savers to shop around and make sure that their savings are working as hard as possible.
“Don’t assume your high street bank will give you a good deal, you have to do your research to find the highest interest rates.” He recommended looking for a rate of no less than 4 per cent, noting that inflation currently sits marginally below this figure, at 3.6 per cent.
By ensuring your savings account is growing at a rate exceeding inflation, your money will grow by at least some amount in real terms. Mr Lakhani said: “Fintechs, building societies, and smaller providers are often able to be more flexible on rates and may even be offering special deals to help boost your savings.”
Looking at what’s currently available, many easy access savings accounts and ISAs offer rates exceeding 4 percent, as well as many fixed-term accounts. Savers may also consider spreading their funds, such as by putting some of their cash into investing.
Interest rates for many savings accounts continue to fall, with the Bank of England slashing the base interest rate three times this year. The rate is currently 4 percent.
Recent data obtained from HMRC through a Freedom of Information request by InvestEngine reveals that there are only 1,530 cash ISAs holding over £250,000, compared to 244,570 stocks and shares ISAs with this amount or more. Andrew Prosser, head of investments at InvestEngine, said: “As the Budget – and with it, potential ISA reform – approaches, the data obtained via FOI reveals a clear and growing divide between saving and investing.
“While cash ISAs will always have an important role, especially for shorter-term financial needs, the figures set out clearly the value of long-term investing, with the highest-value stocks and shares ISAs now worth 17 times that of the top cash ISAs on average.” There have been reports that the Chancellor is considering introducing a new cap on cash ISAs, in an effort to encourage people to invest more.
On this topic, Mr Prosser said: “As the Chancellor looks set to adjust ISA rules to encourage more people to invest, it’s these kinds of numbers that truly help demonstrate the potential that investing holds. Alongside ISA reform, measures to improve financial education and increase its accessibility should also feature in the Budget.
“This approach has far greater potential to drive participation in investing than simply placing restrictions on savings and ultimately foster a better investment culture in the UK.”