While they revise, wave goodbye

MY CURRENT favourite euphemism is "revise". As in "savings rates have been revised on all our accounts". Apparently no one in a financial services PR office is allowed to use the words "dropped", "lowered" or "reduced" when they are writing to journalists about interest rates.

To quote a recent press release for the Safeway savings account: "On 3 December 1998, Safeway will revise the interest rates on its Direct Savings Account - which will pay up to 6.75 per cent gross pa." Fantastic, but until next week Safeway will be paying up to 7.55 per cent on its accounts.

Unfortunately for savers (and the press office), interest rates are on a determined downward path, which means you will increasingly see "revised" returns on your deposit accounts. Savers are getting an average of 5 per cent on savings (before tax) at the moment. Inflation is around 3 per cent, so that wipes out most of your growth. For every pounds 1 saved, you are only getting a 2p gain on your cash, and that's before tax. Knock off 20 per cent tax (or 40 per cent for higher earners) and you have ... not a big fat lot. Sounds depressing when I put it like that, doesn't it?

A few companies are willing to take a profits hit by offering savers higher interest rates. Egg, the Prudential's new brand, is still packing them in at 8 per cent gross interest (0845 600 0292). And now Virgin Direct has joined the savings party. It is not matching Egg - the Virgin rate is 6.25 per cent (08456 101020) - but the company believes that many savers will be attracted by its promise not to drop rates by more than 1 per cent below the bank base rate. So you won't pile in at an over-attractive rate and be disappointed when you check up a couple of years later (take note, Safeway and Sainsbury's).

In the medium term, bank rates could go down to 4 per cent (so that means a magnificent 2 per cent interest rate for many savers - before tax). Your savings are seriously under threat. The stock market beckons.

Don't venture on to the market if a little money in the building society is your only safety net. But if you have several thousand in there and still can't bear the thought of putting any money into shares, consider this fact from the pages of the Motley Fool UK Investment Guide (the excellent investment book we are serialising - see page 22 this week): shares have returned an average 12.2 per cent a year since 1919. That includes the Crash years of 1929 and 1987.

i.berwick@independent.co.uk