Millions of savers are at risk of losing money as the funds grow next month
More than two million savers are being urged to act quickly to secure high-interest accounts before their current accounts grow in the coming months.
Adam Thrower, head of treasury at Shawbrook, said: “The 2022 budget has exacerbated the crisis with rising interest rates, which has led to a rush to save high rates on accounts. new one-year and two-year ISAs prepare in advance using competitive rates.”
This rise has produced what many are calling the second season of ISAs, however, Mr Thrower noted that there is a “clear increase” in fixed term accounts that are growing each autumn. two years ago.
Data from CACI, reviewed by Shawbrook, shows that around 2.2 million accounts, including more than 1.2 million ISAs and more than 900,000 non-ISAs are due grow before the end of the year.
For those with these accounts, who hold around £73billion in savings, Mr Loser warns that “time is running out” to save for the new high-paying fix.
Worryingly, more than six million people face a tax bill at the end of the year that could be avoided by investing in a tax-efficient account.
To help those who are approaching the second season of an ISA and want to choose the right account, Mr. Molahli has shared five important steps that you should consider.
Consider long-term fixes
While one-year bonds and current accounts offer slightly higher principal rates today, Mr. Lose said there are “distinct advantages” to locking in long-term accounts. long.
He explained: “Locking in good rates today ensures that people will have more money in the years to come, regardless of how rates are lowered in the future.” This can be very helpful for those who are close to retirement, or who have enough money set aside to deal with emergency expenses.”
However, he warned: “The window is closing fast to make the most of this.” “With a third of over-55s planning to put their savings to good use when they stop working, choosing a higher interest rate for a longer period of time can result in more savings.”
Acceptance is key
Before people transfer any money to a bank or savings account, they must check that it is protected.
Mr Thrower said: “Under the Financial Services Compensation Scheme (FSCS) you have protection if a bank or building society fails. If this happens, you can claim up to £85,000 per person. You can look this on the FSCS website by entering the name of the bank to ensure your money is protected.”
Don’t be put off by the lack of highways
Most of the major savings providers do not have a high street presence, so, by limiting the choice to a ‘big name’ or only a bank with high street branches, people are “limiting their earnings” “.
Mr Thrower said: “If your favorite bank is FSCS protected and offers a better rate than your current rate, then make the switch.”
ISA or non-ISA
Another important consideration is taxation. Many providers offer Individual Savings Accounts (ISAs) which enable people to save up to £20,000 tax-free per tax year.
Mr Thrower said: “As interest rates rise, many could find themselves close to paying tax on their interest income.”
Outside of ISAs, savers are entitled to a Tax-Free Savings Allowance (PSA) of £1,000 for a basic taxpayer, £500 for a higher rate taxpayer and nothing for of the additional taxpayer.
However, with tax still in place, many may find it would be better to save in an ISA than a traditional savings account.
Currently, a high-income taxpayer saving £10,000 in a one-year fixed account (4.85% AER) will put them on top of personal savings. Similarly, for a basic rate taxpayer, £20,000 in a single account could see them go over the limit.
Mr Thrower continued: “Worryingly, data from CACI has found that the number of accounts at risk of a tax charge has doubled in just one year to over six million, highlighting why Investors should consider the benefits of an ISA to reduce the tax burden.
“For high earners, using ISAs is even more important because of the PSA reduction of just £500 for high-income taxpayers and no PSA at all for low-income taxpayers.” more.”
Use the right account for you
Mr. Thrower said: “Every rescuer is different. Some may have a lot of savings; others may want to use the account for a rainy day fund.
“No matter what you save, or how much you save, choosing the right account is key. For those building a rainy day fund, an easy access or notice account may be more appropriate , as you can get your money without paying early withdrawal fees.
For those looking for a new way to save, we round up the best savings accounts every week, from affordable Cash ISAs.
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