The savings dry spell looks set last a while longer with interest rates remaining low and inflation stubbornly lingering above the government's target. To really get the most out of your money in today's financial climate it's going to take more than just a cursory glance at the savings comparison tables - so we've put together some handy tips on how to maximise your savings:
- Make the most of your ISA allowance: Using up your full annual allowance in your cash ISA should be one of your top priorities. The earlier in the tax year that you do it - the better. You will effectively receive an extra year's growth on your money by banking your cash early in the tax year compared to someone investing on the last day of the tax year.
- Non-taxpayers: If you don't pay income tax then you should ensure that you have completed your R85 form. It is a legal requirement for tax to be deducted by the banks and the building societies before it's paid over to your savings account. If you are on a low income or a complete non-tax payer then by completing the HM Revenue & Customs form you can receive the full gross interest on your savings. The form is usually available from your bank or building society; alternatively, you can get one online at HMRC here.
- Higher-rate taxpayers: If you're lucky enough to a) have sufficient income to put you in the higher tax brackets, and b) trust your spouse - then you could put your savings in to your spouse's name (if your partner is either a non-taxpayer or basic tax payer) thus avoiding having to declare your interest on your personal tax return.
- Watch inflation: External events can have an enormous impact on your savings power. When interest rates are as low as they are presently you must keep an eye on inflation if you have any hope of getting a return on your savings. Keep on the lookout for the after-tax interest rate. In the current climate - it's said that the basic taxpayer needs to be receiving at least 3.75% interest for it to even be worth saving in the first place. And if you're a high-rate taxpayer then it's even harder with some suggesting a paid interest rate of 5.25% to even go to the trouble of saving at all.
- Open an account with a different bank/building society: It may be stating the obvious but ensure you make a concerted effort to regularly check what is available on the market. More often than not, it is the convenience of staying with the bank that holds your current account that ties you in to some really dreadful financial savings accounts. Don't be frightened to take the leap to a new organisation. Using tools like our savings comparison table makes the job of assessing the market virtually effortless and ensures you have the knowledge to put your money in the right places.
- Widen your sphere: Whilst you are concentrating on searching for a great home for your savings - don't lose sight of your current account. You need to be driving each and every financial account in your portfolio as hard as possible to make the most out of these terribly lean times, so check out the state of the current account market - our comparison table will give you information on interest-earning accounts.
- Stop saving and pay off your mortgage with an offset mortgage: With interest rates so low, inflation sitting at 1% higher than the government's target - it really does make sense to put any surplus money you may have towards paying off debts - your mortgage, credit cards, loans etc - as the rate of interest you will be paying monthly on your liabilities is bound to be higher than what is being paid out on your savings accounts. Check out the latest rates on offset mortgages here.
- Get down with the 'financial times': The better informed you are on external influences - the better chance you have of being in the right position at the right time. Knowing what the current level of inflation is and what the current base rate is leads you to make more informed decisions. And if you really want to be on top, it's worth listening to the pre-budget speech in the autumn term to get an idea of government intentions with the economy. You can also subscribe to our weekly newsletter to keep on top of the latest rates, money saving deals and news from the financial world.
- 'Ditch the passbook': There are still some genuinely awful savings accounts available on the high street. Many savers, particularly those of the older generations, can feel safer with the comfort of their much loved and war-weary passbook. However, it's not really the passbook that's the problem, it's the willingness (or lack of) to move from an account that's doing nothing with your money to one that will. Having the confidence to move your money regularly will enable you to get the most from it.
To compare savings accounts from the UK's leading providers click here.
Author: KYM Editor
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