Savings rates are at rock bottom, but that doesn’t mean that saving is a bad idea. Here are some of the commonly asked questions about how to save…
If rates are so low, do I even need an account?
However low the interest, you are still earning money by putting your savings into an account, as opposed to zero interest by keeping it hidden in your house for instance. Most home insurance policies will only cover cash of up to £1,000, however savings accounts provide £85,000 worth of protection for free.
How can I switch savings accounts?
Switching savings accounts is as simple as opening a new account, transferring the money and closing the old account. With cash ISAs however, you will need to ask the new ISA provider to transfer the cash from the old one.
How much tax will I pay on my savings?
The first £1,000 of interest earned is tax-free for basic-rate taxpayers. Anything over £1,000 will be taxed as 20% income tax. Higher rate payers are allowed £500 of interest tax-free.
How many ISAs can I have?
You can only open one Cash ISA per year, and as long as this rule is adhered to, you may have as many ISAs as you like.
Should I invest in Premium Bonds?
Premium bonds have been very popular in the past, and the interest paid out works similar to a lottery. You can find out more on Premium Bonds here. Premium Bond prize pots and the odds of winning have been cut recently however, meaning the amount of interest you can earn has decreased. This has deterred many from investing, making traditional savings accounts a more appealing and reliable way of building interest.