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Savings returns dip to new low

Savers have been confronted with more bad news on the release of figures from the Bank of England showing that savings accounts are paying out the lowest interest rates since 1995.

The figures revealed that the average return on instant access accounts fell from 1.68 per cent in November to just 0.81 per cent in December.

The returns delivered by accounts that require notice of withdrawal dropped by an even greater margin, down from 2.3 per cent to 0.82 per cent.

The average interest rate for cash Isas was almost halved, declining from November’s 3.83 per cent to last month’s 2.09 per cent.

With the Bank of England’s latest cuts in interest rates – 1.5 per cent in December and a further 0.5 per cent this month – yet to be factored in, worries are that savings accounts and bonds will soon be offering even more negligible returns.

Moneyfacts, the financial information website, pointed out that some 40 per cent of accounts promise rates of 1 per cent or lower at the moment, with a quarter producing a miserly 0.5 per cent.

There are 60 instant access accounts, equivalent to 17 per cent of the total, that pay just 0.3 per cent or less on sums up to £5,000, Moneyfacts added.

A few accounts pay no more than 0.05 per cent.

Michelle Slade of Moneyfacts said: “The figures are no great surprise. Rates have been coming down quite dramatically in the last four months. This proves that savers are being penalised at the moment and are struggling to find accounts that pay good returns.”