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Fifth of savings accounts offer rock-bottom rates

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by Jan Harris
Fifth of savings accounts offer rock-bottom rates

With inflation at 5 per cent savings can soon be eroded and yet the number of savings accounts offering 0.1% or less interest has soared over the past year.

Consumer campaign group Which? reports that the number of easy-access and notice accounts paying 0.1% or less has increased by 23% to 384 and these low interest accounts now comprise 21% of all UK bank and building society accounts.

A saver with £5,000 in one of these accounts would receive just £5 or less annual interest.

Many of the low interest accounts are no longer available to new customers as they have been superseded by new accounts, leading Which? to call on banks to simplify their product range.

Commenting in The Telegraph, Which? said: “Banks and building societies are not being upfront about the poor returns and are making little effort to inform customers about the better paying accounts they offer”.

With no easy access savings accounts offering a rate of interest that will beat inflation, consumers may be better looking at other options, especially if they don’t mind tying up their savings for a number of years.

Earlier this week Legal & General launched a fixed-term Inflation Protected Deposit Bond, which protects a saver’s investment from the RPI level of inflation.

The bond promises a minimum return of 3.278 per cent or, if RPI remains higher, 100% of RPI growth and requires an opening deposit of at least £500.

Other inflation-busting fixed-term savings bonds are also available, including a five-year bond from Birmingham Midshires which offers 4.65 per cent interest and the Santander Inflation Linked Savings Bond which pays the rise in the RPI at the end of six-years.

The Post Office also offers an inflation-linked savings bond which is available until January 20, although inflation-linked bonds may only be competitive while inflation remains at a high level.

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News posted: November 18, 2011

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