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Are you, like me, a disillusioned saver? This year has been a torrid one for anyone with money in the bank. The collapse of Icesave, and near collapse of several other savings providers, has made us all a lot more familiar than we wanted to be with the Financial Services Compensation Scheme, and forced many of us to value safety over a high interest rate. Just as well really, as returns are on the way down.
After this month's 1.5% cut in the Bank of England base rate providers scrambled to pull their best fixed-rate deals, and with further cuts on the horizon savers could soon have to adjust to seeing accounts paying less than 5% at the top of the best-buy tables (not that most people trust them any more). Variable rates have so far held up as banks and building societies bid to attract money to boost their balance sheets. But if they are forced to pass on rate cuts to borrowers, surely savings rates will start to fall?
Even if inflation does fall markedly from its current level of 4.5% there could be a long period where many balances are actually losing value in real terms. In fact, Moneyfacts warned yesterday that if all providers were to pass on this month's cut, 12% of accounts would pay no interest at all.
As an avid saver I'm baffled as to what to do with my money. I've been lucky enough to benefit from a rate cut on my mortgage so I've opted to overpay on that, as in the long run the effective return is much better than on any savings account.
But I am just about to retrieve an Isa from Icesave that needs a new home, and have other money in accounts that could soon be paying next to nothing. I'm already investing in the stockmarket but I'm not really prepared to throw any more good money after bad, so what do I do with my cash?
Alistair Darling seems to want us to go out and spend, spend, spend, and I have to admit I'm sorely tempted to blow the lot. If I'd done that at the start of the year - cashed in my shares and not bothered with this year's Isa - I'd probably have a lot more to show for my money than I do now. I know this is a long game we're playing, and I'm trying to hold my nerve, but saving just doesn't seem that rewarding any more. Do you agree?
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