UK savers feeling safe again
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Firstly, let me apologise to readers for my silence for the last two weeks, I have been on holiday and expected to have adequate internet access but was disappointed.
While I was away, the government-backed National Savings & Investments (NS&I) has said that the flight to safety by savers who lost faith in the traditional banking sector is over.
NS&I, which runs Premium Bonds and a variety of savings products, said in its annual report it had been hurt by a return of confidence in banks. Customers ploughed money into NS&I at the height of the crisis because they saw it as a haven for savings.
But in the past three months, they have withdrawn more than they have put in. NS&I, which sees its profits go to the Treasury, experienced inflows of £26bn in the 2008-9 financial year and reported a £12.5bn net financing surplus.
However, it said there was now a “more challenging savings environment”, as it reported £4.5bn in gross outflows of cash in the three months to the end of June, which outstripped inflows of £3.2bn over the same quarter.
At the height of the global financial crisis last September, savers were dividing and moving their funds because of concerns over the future of some banks.
Despite government guarantees that savings were safe, many moved their cash to NS&I and other government-backed institutions such as Northern Rock.
Some banks and building societies were unhappy about the perceived extra safety of NS&I, but it did not launch any extra marketing as a result.
There has now been a clear change in the picture for savers. We have seen a major shift in the market in the first quarter of the year which is a good thing because confidence is a returning to the financial services sector.
Banks and building societies have been offering more attractive interest rates in an attempt to attract more depositors, with a string of new savings products being launched with interest well above the Bank rate of 0.5%.
While it remains the case that many savings accounts are languishing with very low interest rates, pro-active savers can still get good deals if they are prepared to move their funds around to new accounts.
Yet savers should still be alert to the fact that many of these deals are only available to new customers, not to people shifting their funds from a different account within the same bank.
Others offer an introductory bonus that gives a high interest rate for a limited amount of time after opening an account.
