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Martin Lewis has been sharing his money saving tips for years now, often while on shows like ITV’s Good Morning Britain and This Morning. In today's appearance on This Morning, Martin discussed the dire situation faced by savers and provided some useful advice for finding better rates. According to Mr Lewis, if anyone is earning under 1.35 percent in their savings accounts, then they need to abandon them and look elsewhere immediately.
Rates have plummeted over the last six months and they don’t look set to improve in the future.
Despite this, many people will leave their savings in their bank or just sitting in old accounts. As Martin details, that is a surefire way of earning little to nothing in interest, with the average savings rate being a mere 0.4 percent.
In order to earn any real return, savers will need to become much more active with their savings. An aggressive and disloyal stance should be taken, while shifting from best rate to best rate.
Martin details that everyone should check what their savings are paying, every day not spent doing this is lost interest.
READ MORE: Martin Lewis explains how much you may need to save for your child to go to university
Martin Lewis was on This morning to discuss the best options for savers (Image: GETTY & ITV)
Fixed accounts are a good option for savers (Image: GETTY)
Why does Martin Lewis focus on less than 1.35 percent - why is that the key rate?
For those wanting easy-access accounts, were they can put money and withdraw it when they please, then Marcus and Saga are the best options, according to Martin Lewis. At a 1.35 percent rate, these are the top payers. However, there is a minimum age of 50 for these two and both are variable accounts.
As such, a close eye will need to be kept on their rates and if they drop Martin encourages switching accounts. Both of these are easy to open, with very few limits so it’s easy to avoid earning less.
Mr Lewis only mentions accounts that fall under the £85,000 compensation limit currently offered by the Financial Services Compensation Scheme. Which means that any amount of money up to that limit will be returned to the owner automatically in the event of the bank or building society failing.
However, it’s worth noting that both Marcus and Saga are provided by Goldman Sachs Bank, so they share their savings safety protection.
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How can people earn more?
There are options available for those looking to earn more from their savings, however they can be limited in amount or face more restrictive terms. Despite this, Martin details that there’s nothing stopping individuals from utilising a combination of these options. The underlying point is to try and keep as much cash as possible in whatever places earn the most interest.
Those able to lock cash away in fixed accounts could earn more. Martin details that the top one-year fixed rate is 1.65 percent with app based bank Atom Bank. PCF Bank also offers 1.65 percent and as both of those are fixed based, the rate is locked in.
Currently, the top notice account from MoneyBox also pays 1.65 percent. For this one, money can be withdrawn but 95 days notice will be needed. However, the rate is variable so there is no guarantee. Savers will need to keep an eye on the rate they’re receiving.
Low interest rates have been a problem for savers (Image: GETTY)
What about ISAs aren’t they good for savers?
As Martin details, a cash ISA is just a tax-free savings account. Currently, all basic 20 percent rate taxpayers have a personal savings allowance, meaning £1,000 in interest can be earned a year without it being taxed (higher 40 percent rate taxpayers can earn £500 a year and additional 45 percent taxpayers don’t get one).
As most don’t pay tax on savings interest and cash ISA rates are lower than normal savings, only those with large savings or very high earnings should be looking at cash ISAs according to mr Lewis.
The top easy access cash ISA available is with Cynergy Bank at 1.31 percent, the top one year fixed account is also at Cynergy Bank at 1.4 percent.
What about those who put money aside each month?
Martin details that for those who can put money aside each month, far higher rates of interest can be available. Regular savings accounts are special accounts that allow individuals to put money in each month. As the amounts will be limited, much higher rates of interest will be offered.
Coventry BS currently has a 2.5 percent regular savings account and Principality BS offers 2 percent, both allow up to £500 per month to be deposited. It’s also possible to utilise both and use up to £1,000 a month. Missing or skipping months is allowed.
Current account customers of First Direct, HSBC and M&S bank can get linked regular savers accounts paying 2.75 percent, which have a deposit allowance of up to £300 a month.
Are there any other options for boosting interest?
Mr Lewis details that there are many other niche options for those looking to make the best of their interest rates and financial affairs. They can include:
- Pay off debts or mortgage first. If the interest rate on debt is higher than on savings, then it’s often better to pay off the debt rather than save. Individuals will be paying more on their debt than they’ll be earning on savings.
- Claiming universal credit or working tax credits - get a 50 percent Government bonus on savings. The Help to Save scheme lets those on low incomes save up to £50 a month, with a 50 percent bonus of up to £1,200 paid after two and four years. The account’s easy-access withdrawals can be made whenever desired. It should be remembered that if someone has very costly debts than it’s still best to Rey and clear them before saving.
- Saving for first home – the Lifetime ISA is a no-brainer. First-time buyers aged 18-39 saving in this special ISA get a 25 percent bonus added on what’s saved (max £4,000/year) to use towards a first home as long as it’s under £450,000. Moneybox mentioned earlier has the top rate at 1.4 percent.
- Autosave apps. Apps like Chip, Tandem, Plum (which is investing not saving) and MoneyBox use clever tech and data to figure out what can be afforded to save, then move money from a current account to a savings or investment accounts with them automatically. It’s a great way to get into the savings habit, though some of them don’t pay decent interest, in which case every few months individuals should move their money out to a normal savings account to ensure earnings.
For the very latest info see Martin’s full ‘Best Buy Top Savings’ guide.