Savings predictions for 2015

Thanks to wide-ranging pension reforms, changes to the property market with the Help to Buy mortgage guarantee and the Mortgage Market Review (MMR), plus rock-bottom savings rates, it's fair to say 2014 was a tricky year for personal finance.

But what will 2015 bring?

Savers have borne the brunt of the Bank of England low-interest-rate stance to protect the UK economy while borrowers continue to enjoy ultra-low mortgage repayments, and it looks like a similar story for 2015.

If you're hoping to see a better return on your nest egg over the coming year, the prospects don't look promising.

According to City experts, the chances of the first base rate increase for almost seven years look quite remote. With the General Election due in May, it'll be a minor tweak of 0.25% at most in the latter part of the year if we see any upward rate movement at all.

For older savers, there's a bit of better news with the planned launch of Pensioner Bonds from National Savings and Investments (NS&I) in April.

These bonds were first announced in the 2014 Budget and figures of 2.8% fixed for the one-year bond and at three-year option at 4% have been touted.

If these rates stand, then they are well ahead of what's on offer in the wider savings market.

The maximum investment in each bond is £10,000 per person, so earning 2.8% instead of 1.9% on £10,000 for a year means savers will get an extra £90 in interest before tax. With the three-year deal at 4% instead of 2.5%, a £10,000 balance will give an extra £150 per year before tax.

The crux of the issue is that the appetite for savers' money from banks and building societies is almost non-existent and it's not surprising that people are looking at alternative ways to earn a better return.

Current accounts

For some people, current accounts will still work out best in 2015, with the Santander 1|2|3 account by far the most attractive as it pays 3% on balances from £3,000 to £20,000 plus you have instant access to your money.

It's no coincidence that while bank and building society savings accounts have been paying pitiful returns, the popular consumer peer-to-peer (P2P) providers, such as Zopa and RateSetter, are seeing record inflows of money.

P2P lenders may not offer the Financial Services Compensation Scheme safety net but they do protect savers' money via their own protection funds, and while there is no 100% guarantee that your capital is safe, RateSetter has been running for more than four years and no one has lost a single penny to date.

With interest rates of 4% and 5% plus on offer, P2P will undoubtedly be an even bigger growth area in the 12 months ahead.

Elsewhere – it was pleasing to hear from the Chancellor that the ISA allowance will increase to £15,240 from April 2015, though for Cash savers, the additional £240 will not generate much more than £30 or so extra interest!


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