Savers looking for the best possible return on their hard-earned cash may be curious about what type of product to choose right now, and the choice really depends on what you want to save for and how soon you might need to access that money.
Interest rates are on the rise, so the savings market is looking much more fruitful compared to last year, when rates fell to record lows across the spectrum.
Starting the new tax year
ISAs are worthwhile if you want to protect some of your cash from tax, but you should also be conscious of any Personal Savings Allowance (PSA) which protects savings interest from tax. Those who diligently open an ISA each year may default to a cash ISA, but they should also consider alternatives too, such as a stocks and shares ISA.
Those looking to complement their retirement provisions could also open a Lifetime ISA (LISA), as eligible savers can receive free cash from the Government in the form of a 25% bonus, but it’s important to check the full details as early access is penalised.
Overall, there are a variety of ISAs out there to suit different needs from various brands to consider and, as it stands, challenger banks are offering some of the best cash ISAs on the market.
Inflation’s eroding impact
Inflation is already having a huge impact, but it also means the power of your cash is being eroded if you are not able to get a return on an investment that can beat it. However, the stock market is still brimming with uncertainties, so it would not be too surprising to find investors being more cautious or perhaps having an aversion to funds that might leave their cash at risk.
Fund performance can go down as well as up and the past year has been no exception. There have been notable losses and growth during the past year because of external factors, which is making it challenging to compare funds with more historic past performance.
On top of this, the pandemic has impacted the mindset of savers over the past two years, so regardless of current events, it’s important to consider advice carefully before entering any arrangement and understanding the risks of investing in stocks and shares.
Interest rates rising
The back-to-back base rate rises since December by the Bank of England have had a positive impact on the savings market so far, but not every saver is seeing a rise passed onto them. High street banks have been reluctant to pass on the full base rate rise to their range both in the past and in the present day, and there are still some deals paying as little as 0.01%. As it stands, challenger banks and building societies are offering some of the best rates we have seen in months. So long as they are protected by the Financial Services Compensation Scheme (FSCS), the same way the big banks are, there really is little reason to overlook them.
Outlook for 2022
Unfortunately, this year has started out with economic uncertainty, so it will not be too surprising if you want to keep your savings closer to hand. However, this should not stop you from comparing deals and getting into the habit of reviewing existing accounts. As interest rates continue to rise, hopefully any apathy still felt by savers from last year will fade as they can find better choice and rates. Those looking to invest must get good advice first due to the ongoing volatility within the stock market, and while no one can predict the future, its unpredictability could continue as we move further into 2022.