Families raid savings as interest rates hit all-time low

Shaun Port

New figures from the Bank of England this week revealed that average interest rates on long-term savings accounts were now at 2.4%, an all-time low. In response, families have withdrawn a staggering £23bn from their savings in the last 12 months – £900 for every household in the UK. But perhaps the greatest surprise here is that it’s taken this long for UK savers to react.  

Families raid savings accounts

It’s been an incredibly tough few years for savers, so it’s no surprise to see they’re withdrawing en masse from their high street savings accounts in the face of very meagre returns.

Interest rates have held at 0.5% for 44 months, inflation has been well above the Bank of England’s 2% target rate all year and many UK workers have seen their salaries frozen in recent times. Many are effectively losing money every day they keep their cash in a standard savings account.

It seems the trend may be set to continue, as savers seek out better returns and get smarter with their money.

The Bank’s announcement that average savings rates are now at 2.4% adds further fuel to the fire and will force savers to explore alternative investment options.

Savings rates hit record lowCompare that to the kind of performance you can get from an investment portfolio. For example, our medium-risk portfolio delivered 12.3% returns in the 12 months to October 2013. That’s a profit of over £3,000 on a lump sum of £25,000 – in just one year, after fees!

No wonder we’re witnessing an influx of customers who are simply frustrated at seeing their savings lose value every month. There are more intelligent investment services out there and you don’t need to be super-rich to achieve them – you can start a Nutmeg portfolio with as little as £1,000 (plus £50 contributions per month up to £5,000).


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Risk warning

The views and opinions expressed herein are for informational purposes only. They are subject to change without notice, and do not take into account the specific investment objectives, financial situation or individual needs of any particular person. They should not be viewed as recommendations, independent research, or investment advice of any kind. The views accurately reflect the personal views of the author. They are not personal recommendations and should not be regarded as solicitations or offers to buy or sell any of the securities or instruments mentioned. The views are based on public information that Nutmeg considers reliable but does not represent that the information contained herein is accurate or complete.

With investment comes risk. The price and value of investments mentioned and income arising from them may fluctuate and you may get back less than you invest. A movement in exchange rates may have a separate effect, unfavourable as well as favourable, on the gain or loss otherwise experienced on the investment concerned.  Past performance is not an indicator of future results, and future returns are not guaranteed.   We acknowledge an individual’s tax situation is unique and tax legislation may be subject to change in the future.


Shaun Port

Shaun Port

Shaun is the chief investment officer at Nutmeg. He has over 20 years’ experience developing and implementing investment strategies for clients ranging from central banks to pension schemes to charities and private individuals. Shaun holds a degree in Mathematical Economics from the University of Birmingham and is a Chartered Alternative Investment Analyst. He can be found tweeting @ShaunPort.

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