Finance: Expert on impact of inflation on savings accounts
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Savings accounts have been hard hit in recent months, following the Bank of England’s decision to lower its base rate to 0.1 percent in March 2020. The central bank has not increased this since, meaning it has had somewhat of a domino effect on high street and other providers Britons usually turn to in order to grow their cash. With a lack of optimism in the market, many savers have felt downtrodden recently, as they look for alternatives to cash saving to increase their funds for a rainy day, or for specific financial goals they have in mind in the future. But slowly but surely, there has been an interest rate resurrection in the market which has seen some banks looking to offer better rates than they have been able to throughout the last 18 months. Namely, these are challenger banks which may not be so popular with Britons, but could help new custom to flock to them with their latest announcements.
This is the case for Paragon Bank, a provider which has won many awards for customer satisfaction and provision of savings and ISAs. However, it may not be such a staple as some of the more familiar high street providers which have been in operation in some instances for hundreds of years.
Paragon has delighted savers with the launch of its new easy access savings account, which is now available to customers who wish to partake in the option with the provider.
It is called the ‘Limited Edition Easy Access Account’, and from the name, it is likely to make Britons want to act quickly in order to secure the offer that it provides. This is set at 0.55 percent variable, which means the bank reserves the right to change this at any time it sees fit. Interest on this account can be paid on either a yearly or a monthly basis.
However, that is not all Paragon is providing, and while the easy access account is likely to suit many savers who are looking for control over their cash as and when they choose to access it, there are also other options which could pique a person’s interest.
Savings: Great update for savers as bank issues new account & increases rates on ISAs (Image: Getty)
On top of its new launch, Paragon has also announced an increase to two of its fixed rate ISAs – or Instant Savings Accounts as they are formally known. ISAs continue to be a popular option for their tax-free savings potential, with the ability to currently put away up to £20,000 per year into this type of account.
Paragon’s one year ISA previously had an interest rate of 0.80 percent, but this has increased to 0.85 percent. Indeed, the two year fixed rate ISA has also risen from the rate of 1.01 to 1.06 percent for savers.
Paragon has the ability for its savings products to be managed and opened in different ways. This can be online, over the phone or by post, depending on what a person prefers. These services are available to both new and existing customers with the provider.
In addition, Paragon also has an exciting feature known as the ISA Wallet, designed to assist savers who are managing their money and embarking upon a savings journey, an effort which can often be a challenge, particularly in the current climate.
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The feature from the bank allows savers to spread their £2,000 annual ISA allowance with Paragon across multiple cash ISAs. This means it does not have to be held in one solitary account. Savers will be able to manage their money across multiple accounts with ease in this way.
The easy access ISAs are also eligible for the ‘Flexibility’ feature, which allows any money withdrawn from an ISA to be replaced without the year’s allowance being impacted.
Derek Sprawling, Savings Director at Paragon Bank, commented on the latest release from the provider, and said: “We want to support people who are looking to build up their tax-free savings by offering a range of cash ISAs that are suited to all needs, as well as a broad range of competitive non-ISA products.
“Our saving accounts are available to both new and existing customers and people who hold an existing easy access account with us can easily switch over.
Savings: There are a number of ways to save (Image: EXPRESS)
“All of our ISAs are designed with flexibility in mind. Our ISA Wallet feature gives savers the opportunity to split their ISA allowance across different ISA accounts, while our ‘flexibility’ feature allows easy access customers to replace funds withdrawn from an ISA without their allowance being impacted. On top of this, customers have the option to manage their fixed rate through the post.
“It’s easy for people looking for a competitive deal to open and manage an account with Paragon and they can choose to apply online, by telephone or by post. Our 28-day rate guarantee ensures that any customers part way through the application process already, or with an imminent maturity with us, will also benefit from our new rates automatically.”
News from Paragon alongside other banks, notably smaller providers, is likely to be a fantastic update for those hoping to grow their cash. In this sense, though, many will have to ditch more familiar providers if they are really in search of the market’s most favourable rates at the present time.
This may not always be a bad thing, though, as the smaller nature of the challengers is what gives them the ability to offer these rates. However, with an influx of savers hunting for the best deals, some may not have the capacity, and could withdraw these offers from the table. As such, it will be important to act quickly on the matter.
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Rachel Springall, Finance Expert at Moneyfacts, recently echoed this point when making a comment about the savings and interest rate market as it currently stands for British savers.
She said: “Savers yet to utilise their ISA allowance or who are perhaps considering their options if they have an ISA set to mature this autumn will note some improvements to the market as there are now more ISA options than there have been since October 2020 when there were 373 deals.
“However, when comparing average rates, fixed ISAs are still paying below their fixed bond counterparts, so savers must consider their options if they have a Personal Savings Allowance and some savers may even decide to withdraw funds from ISAs entirely. Indeed, according to the Bank of England, there was an outflow of £699million from cash ISAs during June, bringing the total outflow so far during 2021 to almost £2.8billion.
“However, easy access accounts remain a firm favourite amongst savers looking for flexibility with their cash. The inflow into sight deposits during June was almost £10billion, and over £66billion so far this year.
“Providers and savers alike will need to keep a close eye on the ever-changing market by monitoring the top rate tables. The consecutive rate rises across much of the savings spectrum are green shoots of life to a market that felt barren only a few months ago and there is no telling how long a good deal will last. It is evident that savers have disposable income to put aside and some may be using their pot to supplement their income, so it is hoped providers will inject more competition in the months to come to encourage consumers to take advantage.”