Cover of MoneyWeek magazine issue no. 475

Busted flush

26 February 2010 / Issue 475

The West is broke – so where should you invest now..?

PLUS:

  • Markets are set to fall – here's how to profit
  • Profit from soaring gas and electricity bills
  • Fast-food banking is coming to Britain

Excerpt

What’s a saver to do?

In 2008 we suggested you pile your spare cash into an account with Northern Rock. Not only were you getting an interest rate of 7%, but the government had said it would fully back every deposit. So you got a well-above-inflation return, absolutely risk free.

Those were the days. Now things don’t look so good. Northern Rock’s rates hover around the 2%-3% mark, well below the 4.4% that basic-rate taxpayers have to get before they make a real return. You can’t get much better elsewhere either. The average instant-access account pays just 0.73%. The best fixed-rate deals come in at around 3%. And the government is now removing Northern Rock’s state guarantee. So you can no longer even console yourself with the idea that your money is 100% safe.

So what’s a saver to do? Well, assuming you’re in cash because you can’t or won’t risk your capital, just find the best rate you can, aim to keep under £50,000 (the sum covered by the Financial Services Compensation Scheme) in any one account, and live with it. Do anything else and you risk losing a lot more than the couple of percent inflation is stealing from you each year.

• Read the full editor’s letter here:
What’s a saver to do?