Millions of people are having to pay out hundreds in fees as they raid their fixed rate savings early to get through the recession – but by saving your money in an offset its available whenever you need it.

New research from uSwitch.com has found that nearly one million fixed rate savers are being forced to access their savings early due to job losses and mounting housing bills. As a result, these savers have incurred penalty fees averaging £132 each.

In total, the website says over 800,000 consumers have made an average withdrawal of £3,738 each from their fixed rate account in the last year, with over a third of these incurring penalty charges. These cash hungry savers have racked up a total bill of £40m in withdrawal penalties. But they have no choice – they need the money and their savings rates are so low as to bring in next to no income.

Ironically, nearly nine out of ten savers chose fixed rates because it was the only decent rate available at the time and 17% admit to making a rash decision.

Rumina Hassam, savings expert at uSwitch.com says: “Almost half of the accounts available do not allow consumers to access their cash under any circumstances which, in a climate of recession and redunancy, this is a dangerous situation for some people. The devil really is in the detail as far as fixed rate savings are concerned.”

If you invest your money into an offset rather than a fixed rate savings account your money can be gotten hold of whenever you need it, free of charge. Of course, this may lead you to having an increased mortgage rate but it’s there if you need it.

People who do plan to take money out of their offset should only do so after taking some expert advice – but because offset offers savers the best savings during this downturn most will probably be able to get by without having to spend their hard-saved nest eggs.

SOURCE: uSwitch.com, 28/09/09

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