Last week we wrote about how to review your investment portfolio. But the start of the year is also a good time to review your low-risk assets to make sure that they are working hard enough. This is particularly pertinent in a period when cash is losing you money by not keeping pace with inflation.
Many investors are sitting on large amounts of cash, either while waiting for better opportunities (like our Sipp columnist David Stevenson), or because they need to preserve this portion of their portfolio. Whatever your reason for holding cash, minimising your losses on this asset should be a priority - and so you need to come up with a savings plan of action.
Don't leave your money in uncompetitive accounts. Many savers are guilty of inertia and the banks and building societies take full advantage of that. You open an account which was no doubt fairly competitive to begin with, only for it to dwindle to uncompetitive levels over time.
You may be unaware that the rate has dropped or even if you are aware you possibly can't be bothered with the hassle of moving. But if someone handed you an extra £1,375 a year would you say no? That's the difference between a poor paying account and one of the best easy access accounts for someone investing £50,000. (£50,000 in Virgin Money's Easy Access Saver at 2.85 per cent gross AER would earn £1,425 a year before tax, whereas it would earn just £50 in Barclays' Easy Saver paying 0.10 per cent gross AER.)
Income investors might want to lock their money up for longer to get a better rate. Top rate one-year bonds at 3.60 per cent gross AER are available from AA, Shawbrook Bank, Clydesdale Bank and Yorkshire Bank.
You can search for the best rates by using Investors Chronicle's savings rate tables.
Aside from a decent rate, you also need to make sure that your cash is a true safe haven in the event that your bank goes bust. So you need to pick an institution that is a member of a depositor protection scheme such as the UK's Financial Services Compensation Scheme (FSCS).
So with best rates and depositor protection in mind, should you go for new entrant Shawbrook Bank, which has several products topping the savings best buy tables? They include:
• 95 Day Notice Personal Savings Account - 3.35 per cent Gross/AER, min £1k max £50k
• 120 Day Notice Personal Savings Account - 3.45 per cent Gross/AER, min £1k max £500k
• 1 Year Fixed Rate Bond - 3.60 per cent Gross/AER, min £2k max £500K
• 18 Month Fixed Rate Bond - 3.90 per cent Gross/AER, min £5k max £500k
• 30 Month Fixed Rate Bond - 4.35 per cent Gross/AER, min £5k max £500k
• 3 Year Fixed Rate Bond - 4.45 per cent Gross/AER, min £5k max £1m
• 4 Year Fixed Rate Bond - 4.45 per cent Gross/AER, min £5k max £1m
• 5 Year Fixed Rate Bond - 4.80 per cent Gross/AER, min £5k max £1m
Owned by RBS Equity Finance, Shawbrook Bank offers saving and lending products to individuals and businesses (although lending products are only available through selected brokers). It came into existence on 17 October 2011, bringing together elements of Whiteaway Laidlaw Bank, Link Loans and Commercial First. The bank is certainly winning business - this week it withdrew its two-year Fixed Rate Bond from the market. The bond has been very popular, and it is now fully subscribed.
Owen Woodley, chief executive officer of Shawbrook Bank says: "We know many savers will be concerned about what's going on in Europe and whether their funds will be safe. Shawbrook is a traditional savings and lending bank with no exposure to the Eurozone, which means that we are free of toxic debt, our bank is stable and savings are secure."
It is great to see a new bank taking on the established competition. While you may wish to tread carefully, Shawbrook Bank does hold a UK Banking Licence, is regulated by the Financial Services Authority and is covered by the UK Financial Services Compensation Scheme. So in the event of the bank going bust, the FSCS will return the first £85,000 you hold on deposit, per financial group.
Although Shawbrook Bank is owned by RBS Equity Finance, it does not affect compensation arrangements for other RBS group companies - you would have £85,000 protected by the Financial Services Compensation Scheme for Shawbrook, and a further £85,000 with RBS (including NatWest).
As far as depositor protection goes, Shawbrook looks a better bet than holding your money with the UK arms of foreign banks who are signed up to overseas depositor protection schemes in their home countries.
| READ MORE ABOUT SAVINGS SAFETY: Find out more about how safe are your savings by reading our articles Rock solid home for your savings and Why your savings may not be safe. |
SNAPSHOT OF BEST SAVINGS RATES
| Account | AER | Notice/Term | Minimum Investment | Account operations |
| BEST INSTANT ACCESS SAVINGS ACCOUNTS | ||||
| Virgin Money Easy Access Saver | 2.85% | Instant | £1 | Branch, postal |
| Sainsbury's Finance Extra Saver | 2.75% | None | £1 | Online, phone |
| Aldermore Easy Access Issue 2 | 2.75% | None | £1 | Online, postal, phone |
| BEST SHORT TERM FIXED RATE BONDS | ||||
| AA Internet 1 Year Fixed Rate Bond | 3.60% | 1 Year bond | £1 | Online |
| Shawbrook Bank 1 Year Fixed Rate Bond Issue 2 | 3.60% | 1 Year bond | £2,000 | Branch, postal |
| Clydesdale Bank Term Deposits* | 3.60% | 1 Year bond | £2,000 | Online, branch, postal |
| BEST MEDIUM TERM FIXED RATE BONDS | ||||
| Shawbrook Bank 3 Year Fixed Rate Bond Issue 1 | 4.45% | 3 Year bond | £5,000 | Branch, postal |
| Shawbrook Bank 30 Month Fixed Rate Bond Issue 1 | 4.35% | 30 Month bond | £5,000 | Branch, postal |
| Clydesdale Bank Term Deposits* | 4.30% | 3 Year bond | £2,000 | Online, branch, postal |
| BEST LONG TERM FIXED RATE BONDS | ||||
| Shawbrook Bank 5 Year Fixed Rate Bond Issue 1 | 4.80% | 5 Year bond | £5,000 | Branch, postal |
| Clydesdale Bank Term Deposits* | 4.70% | 5 Year bond | £2,000 | Online, branch, postal |
| BM Savings 5 Year Fixed Rate | 4.65% | 5 Year bond | £1 | Postal |
Source: Moneyfacts.co.uk, 10 January 2012
*Same deal also available from Yorkshire Bank
