Savers made hay while the sun shone

In September, households took the chance to boost their emergency savings buffers amid the pandemic.

September saw higher deposits into instant access accounts, as households took a chance to boost their emergency savings buffers during the pandemic, according to figures published this morning.

Bank of England Money and Credit statistics (Oct 29) released today showed an increase in households’ deposits of £6.8 billion in September, below the average of £17.3bn between March and June but higher than the £5.5bn August figure and the £5bn average in the six months to February 2020.

The Bank of England summary stated that “the strong flow of deposits in September can be accounted for by deposits into instant access accounts.”

Becky O’Connor, Head of Pensions and Savings for interactive investor, said: “For those earning normally, the COVID-19 pandemic has presented both an opportunity and a strong motivation to boost emergency savings buffers.

“The Bank of England deposits data suggests that people were making hay while the sun was shining and their normal spending levels remained subdued.

“Savers took to heart the usual guidance to keep cash ready to go in instant access accounts and because of spending reductions, were able to divert more money into savings accounts than normal.

“Despite ultra low interest rates, there are benefits to keeping some cash in an instant access account for unexpected emergencies or hard times, as the pandemic has so painfully demonstrated through the sudden loss of income of millions of workers. However savers should take care not to keep more in low interest accounts than they need, as it can be eroded by inflation.

“For those who want to make a long term return on their non-emergency money, then investing via an ISA or pension is worth considering.”

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “Many Brits have been fortunate enough to save a significant amount in travel and entertainment costs during months of full lockdown and bolster the amount they squirrel away into a savings account as a result. 

“However, with savings rates as low as a pitiful 0.01%, adding just 10p on an initial deposit of £1,000 in the first year where interest is applied annually, there is very little reward for this diligent behaviour. And things can go from bad to worse for savers with whispers of negative interest rates. 

 “There has been little carrot for savers in recent history, as rates have languished since the base rate was first lowered to help stimulate economic growth following the financial crisis. Savers had already been buffeted by two rate cuts in March this year, and any further reduction would rub salt in the wound.”

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