Advisers back cash deposits despite rate tumble

Advisers back cash deposits despite rate tumble

Advisers have backed the importance of cash in financial planning despite data showing top rates have tumbled in recent weeks.

The research, published yesterday by Moneyfacts (September 9), showed several rate cuts had been made to some of the top deals across various sectors since the end of August, causing a ripple effect on other saving deals and lowering the overall rates offered by the market.

Some rate-leading easy access accounts — which generally pay higher interest than current accounts while giving flexibility to withdraw money when needed — slashed their rates after Virgin Money lowered its ‘Double Take E-Saver’ (previously the top rate in the market) from 1.5 per cent to 1.43 per cent.

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Within the days that followed, a domino effect saw Marcus by Goldman Sachs drop the rate offered in its online savings account from 1.49 per cent to 1.44 per cent, Cynergy Bank replaced their version of this account at 1.45 per cent (previously 1.50 per cent) and Ford Money withdrew its deal to new customers.

Fixed rate bonds also saw reductions. Bank of London and The Middle East cut its five-year fixed deal’s ‘expected profit rate’ twice in the space of a week, from 2.75 per cent to 2.5 per cent on August 28 and then down to 2.3 per cent on September 4.

The expected profit rate on BLME’s product was previously the top rate in the sector. As BLME is a Shariah compliant product, the bank offers an expected profit rate rather than an interest rate which is in line with the Shariah concept that money should not in itself create money.

Other previously top 10 fixed rate cuts included OakNorth’s 24-month fixed deal — which now offers 1.95 per cent, down from 2.04 at the end of August — and Masthaven’s two-year fixed, which was cut from 2.05 per cent to 1.98 per cent.

Similarly, United Trust’s 15-month fixed fell from 2 per cent to 1.85 per cent while Atom Bank cut the rate offered on its one-year fixed to 1.8 per cent from 2 per cent.

Rachel Springall, a finance expert at Moneyfacts, said: “Savers will be disappointed and frustrated to see the savings market weakening, especially if they were eyeing up the top rates and have subsequently missed the boat. 

“Indeed, over just the past fortnight, we have seen some of the best rates in the market slashed and some have been pulled from new customers entirely.

“It is as clear as day to see how delicate the savings market can be, which is why savers should never assume that the top rates will be around forever. As is proven from the last fortnight of cuts, savers need to be quick with their decision-making, or they could miss out.”

But despite low interest rates and a 'delicate' market, some advisers backed the fact cash savings played a vital role in financial advice.

Scott Gallacher, a financial planner at Rowley Turton, said: “Advisers naturally advocate the power of investments to ‘grow’ the real value of money, but cash deposits remain an integral part of financial planning.”