Look around to make your savings more interesting

Bank and building society rates are at their lowest since 1939. Clifford German suggests some alternatives that could give a better return

Interest rates on the average bank and building society account have reached their lowest levels since 1939, according to the MoneyFacts database. Part of the blame must fall on building societies that are taking advantage of investors locked into their accounts while they wait for windfall profits and bonuses, but societies generally are keeping down rates for savers and borrowers in the hope of increasing their share of the mortgage market, while banks traditionally pay savers less than building societies do.

But investors dissatisfied with the minuscule rates of interest on bank and building society accounts do have alternatives. Fidelity Investments suggests cash unit trusts, which reinvest investors' cash in the London money markets where rates are substantially higher than on small retail deposits, or in gilt edged stock and bonds issued by local authorities which are close to maturity.

Fidelity's own MoneyBuilder Cash charges no inital fees or exit fees, the annual management charge is just 0.5 per cent, and it pays 5.2 per cent gross on a minimum deposit of pounds 5,000, which is double the average building society rate.

Some of the specialised London banks also offer money market accounts on larger deposits, offering fixed rates from overnight up to five years. Cater Allen Bank - part of the London discount house group - currently pays 4.93 per cent gross on pounds 50,000 on deposit overnight. The rate rises on deposits for a week or longer, reaching 6.75 on three-year money. Interest is paid monthly.

Small businesses can also earn more off the high street. On a current account, allowing 150 transactions a quarter, Cater Allen Bank offers 3.75 per cent gross on credit balances of pounds 10,000, which is at least double the comparable rates at high street banks.

Mutual building societies are, however, working overtime to exploit their cost advantage over their rivals who are converting into banks.

At present the mutuals are paying around 0.25 per cent more to savers on comparable accounts, and the margin could rise as banks and building societies start to favour savers rather than borrowers, who currently get an advantage of around 0.5 per cent from mutual lenders.

But for many investors who like the security of a bank or building society, the future trend of interest rates is as important as current rates. Higher rates are available on longer-term money. West Bromwich Building Society has just launched a one-year bond which offers 6 per cent gross and a three-year bond which pays 7.25 per cent gross, both on a minimum investment of pounds 2,500.

But if base rates begin to rise within the next 12 months, shorter-term investors could have the last laugh. Sun Banking pays 5.25 per cent gross on pounds 1,000 for a month, 6 per cent for one-year money and 7.5 per cent for five years, but increases in base rates could make those longer rates less attractive.

In particular, many investors with variable-rate Tessa accounts which matured over the past six months who rolled them over into fixed-rate Tessas for the next five years - to obtain an extra 1-2 per cent interest - could find that they have made the wrong choice again.

Sport
world cup 2014A history of the third-place play-offs
News
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

Sport
The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Voices
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
...and the weight loss industry is rubbing its hands in glee
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Arts and Entertainment
'Eminem's recovery from substance abuse has made him a more potent performer, with physical charisma and energy he never had before'
arts + entsReview: Wembley Stadium ***
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Finacial products from our partners
Property search

Consumers given power to choose a green deal

How would you like to be able to choose how your electricity is made and even where it come from? It may sound futuristic and fanciful but the independent supplier Co-operative Energy has made it a reality this week.

'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers

City regulator says existing customers suffer worst rates

Motor insurers divided on proposals for whiplash ban

MPs want medical evidence for claims. Will this bring higher premiums?

British Gas repays £1m for mis-sold deals

British Gas was yesterday forced to pay back £1m to its customers after mis-selling them energy deals.

Bare necessities of life cost a pensioner £10,000

Pensioners now have to spend £10,387 a year on basic necessities such as food and fuel. new figures published today reveal.

Six months since its introduction, Obamacare has set market's pulse racing

As America's health reforms take effect, some firms look well placed to benefit, says Simon Read

Holidaymakers warned over hidden charges when opting to pay in sterling abroad

Fresh warnings emerged this week that overseas retailers and hotels aren't playing fair.

Employees will be able to request flexible hours in drive to make workplaces family friendly

From next week employees will be able to request changes to working hours. Rob Griffin weighs up the options

E2Energy's wind-turbine scheme offers green investors 7.5 per cent a year

If you're fed up with paltry returns on your savings and are interested in green energy, a new loan-based crowdfund launched this week could be a better home for your cash.

Why miss the chance of tax-free returns as Isas raise their game?

The tax-free limit of £15,000 is a big jump and rates for savers are starting to edge up, writes Simon Read
More and more trade drivers are falling prey to fraudsters

'Crash for cash' gangs target white van man

"Crash for cash" accidents are reaching record levels. The insurer Aviva trawled through its claims data to discover that fraudulent "slam-ons" – accidents deliberately caused in order that claims can be made for whiplash compensation – rose by 51 per cent in 2013.

Lenders lose their appetite for debt forgiveness

Banks may be getting tougher with people who fall into financial difficulties, a debt charity has warned. Statistics from The Money Charity reveal that the amount of personal debt written off by banks and building societies reached an all-time low during the first quarter of the year.

Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Information Security Manager (ISO 27001, Accreditation, ITIL)

    £70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

    Biztalk - outstanding opportunity

    £75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

    Trade Desk Specialist (FIX, Linux, Windows, Network Security)

    £60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

    Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

    £35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice