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Rates for larger savings accounts have dropped to just 0.89% as savings rates for those with a lot of money to save become unworkable in this low rate environment.

The latest findings from Investec have revealed that between February and May 2009, banks and building societies reduced the rate on 725 savings accounts for balances of £25,000 or more.

Although around one in 10 accounts for balances of more than £25,000 paid interest of 2% or more throughout the last quarter, many savers for larger balances are losing out as the average rate for these accounts over the period was 0.89%.

The bank has found that since the last quarter, the number of accounts paying less than 1% interest on balances of £25,000 has increased from 386 to 517 accounts between February and May 2009. There has also been a marked reduction since the last quarter in the number of accounts paying between 3.01% and 3.5%. From November to February, 47 accounts paid between 3.01% and 3.5%, compared to just seven accounts between February and May.

With more than one in 10 of UK adults estimated to have more than £25,000 deposited in cash savings accounts, it’s time for savers to check that their bank or building society is paying a consistently competitive rate of interest. If they are not it might be time to think of some alternative ways to make money from their money.

Linda McBain, head of Banking at Investec Private Bank, says: “During the current low interest rate environment it’s particularly important that savers are not lured by short-term, headline grabbing rates and instead ensure that their money is deposited in an account paying consistently competitive returns over the long-term.”

With offset the long-term benefits work alongside the short-term rewards. You can be rewarded with higher rates of savings and you can pay off your mortgage faster. Talk to your adviser about using your large lump sums alongside your mortgage.

SOURCE: Investec, 04/06/09

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