Expert Urges Britons To Avoid Long-term Savings Accounts

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Long-term savings accounts should not be considered often by consumers, it has been said.

Consumers should avoid taking out savings accounts such as fixed rate bonds with particularly long return periods in the aftermath of the global economic downturn, an expert has said.

In the wake of the recession, the general mood among investors has been characterised by widespread risk-aversion as people look to play it safe with their money by storing it in products like ISAs with guarantees of returns over lengthy periods.

However, according to Jason Butler, partner at Bloomsbury Financial Planning, it is not a good idea to take out savings for anything longer than six months "unless you really need to know the return".

Research published last week (June 22nd) by F&C Investments showed that while the majority of Britons recognise the fact that stashing cash for the future is a good idea in the present economic climate, many are being hampered in their objectives by their attitude towards risk.

For instance, 30 per cent of respondents indicated the primary attraction to saving for them is complete capital security, meaning that some 70 per cent have pretty much dismissed any equity investment from the outset.

Meanwhile, 40 per cent pursue a strong rate of interest, with 45 per cent stating that the riskiest level of investment they hold is cash on a deposit.

With these figures in mind, Mr Butler noted: "If you can't lock it [the money] up for ten years then you can't take the risk with it."

He went on to urge individuals to avoid locking up their funds for too long if at all possible, because it is likely they will be "worse off" eventually when rates attached to their product go up, meaning they will be stuck with an account offering no significant return.

Furthermore, the expert advised consumers to also look out for notice periods and transfer penalties on their packages.

Jonathan Davis, managing director of Jonathan Davis Wealth Management, has called on consumers to do all they can to maximise the figures they are receiving from their cash held in the likes of ISAs and fixed rate bonds.

Mr Davis explained that one of the best ways people can go about boosting their funds is to "get optimal interest rates" on their savings and he added that this can be done relatively comfortably.

"You can easily go online and conduct a search to find 2.5 to three per cent interest," he noted.

For instance, the expert stated that by doing this, anyone with 50,000 stored in cash savings would earn around 750 extra annually for no additional outlay.

This comes after a study by The Co-operative Bank found that 80 per cent of the UK adult population are concerned about their personal finance situation.

About the Author:
UK Price Comparison website Which4U - Compare Credit Cards, ISAs, Bank Accounts, Fixed Rate Bonds, Savings Accounts, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals



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