The New Year is traditionally a time when people think about their savings and aim to save more.
But while the savings market remains in a slumber, it can be difficult to decide on the best home for your nest egg.
Here, we explore the prospects of savings accounts, Isas, current accounts, as well as less traditional savings mechanisms.
Savings accounts and Isas
A New Year brings a new tax-free Isa allowance. From 6 April 2015, you will be able to deposit up to £15,240 in a cash Isa, or a stocks and shares Isa, or a mixture of both.
If you’re saving for the long-term future, it’s worth using as much of your annual tax-free allowance as possible. Savings accounts look set to remain abysmal and should only be considered once you’ve used up your annual Isa allowance.
You’ll get a better rate by agreeing to lock up your savings in a fixed-rate Isa for a year or more, but with even fixed-rate Isas offering relatively poor returns, you may be tempted to stay with an instant-access product in the hope that returns on savings products improve in 2015. Should savings rates improve, for example as a result of an increase in the Bank of England base rate, then those with funds locked in a fixed-rate deal would be charged a fee to transfer to a better account.
The Which? Money Compare tables let you search hundreds of savings accounts and Isas to find a great account to choose the best savings rates based on quality of service as well as cost and benefits.
Which? comparison table: Savings accounts and Isas – hundreds of accounts compared
Banks and building societies launched all sorts of special offers to try and attract new current account customers in 2014, and there’s no evidence to suggest this won’t continue next year.
The best current accounts for those in credit offer up to 5% interest on balances in credit – and with the Competition and Markets Authority due to complete a review of the current account market after the general election – we can also hope for more transparent banking in 2015.
Find out more: Make the most of multiple current accounts – get a better rate on your savings
Pensioner Bonds will be introduced in January offering rates of 2.8% for a one-year bond and 4% for a three-year bond, which is far more than traditional savings accounts.
They’re expected to sell out so it’s worth visiting the NS&I website to set up an email reminder of their release date. Bear in mind they’re only available to those aged over 65.
Cash remains a low risk asset class, but one that offers the lowest potential return. Our investment portfolio tool suggests how much money you could potentially gain, as well as much you may lose, by investing in certain equities.
Find out more: Investment portfolio tool – build an investment portfolio in minutes
This niche method of investing became more far popular in 2014, perhaps partly due to the fact that peer-to-peer companies are now regulated by the Financial Conduct Authority.
Lenders can expect to earn 5-6% on a five-year investment, although there is a greater risk of losing capital compared with traditional lenders.
In this year’s Budget, it was announced that peer-to-peer loans will soon be eligible to be held within a tax-free Isa wrapper, although it remains to be seen whether this will occur in 2015.
Find out more: Peer-to-peer lending websites reviewed – we rate the UK’s top three companies
- Understanding investment risk – the different types of risk explained
- 50 ways to save money – our comprehensive money-saving guide
- Call the Which? Money Helpline – your financial queries answered
Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers, Which? Insurance Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.