It started with Goldman Sachs entering the UK savings account market with their Marcus account paying an annualised 1.5%. Nothing to get excited about given, that after I pay my additional rate tax of 45%, that reduces to 0.83% meaning in inflation adjusted terms I’m still going backwards at a rate of knots with the RPI currently sitting at 3.3%. Even for those with a basic rate tax of 20% this account still sees you going backwards in real terms, both before or after you’ve used your £1,000 basic rate tax free personal savings allowance, as you’ll only end up with 1.5% (within the tax free personal savings allowance) or 1.2% (post the tax free savings allowance) in your pocket. Still better than a poke in the eye with a pointy stick as it puts an extra £222 into my pocket annually when compared to the savings product I ditched.
Then Charter Savings Bank popped in with a slightly lower annualised 1.4%. Again, nothing to write home about, but better than what I did have meaning an extra £153 in my pocket annually.
Even RateSetter P2P rates have been picking up recently. I’m now predominantly out of the 3 year market with most of my money in the 1 year. I’ll soon start moving out of that as well given I’ll be likely be home buying within the next 12 months. Since I started investing with RateSetter in early 2014 I’ve achieved an annualised 4.1% and today the money I have in the 1 year market is achieving 4.0%. Looking at the last 1 year loans matched and today that’s ticked up to 4.9% so some benefits here as well.
At that rate a 45% tax payer is still going backwards in RPI inflation adjusted terms though as the after tax rate is still only 2.7% but for those 20% tax payers out there you’re now at least ahead a little with an after tax rate of 4.9% (within the tax free personal savings allowance) or 3.9% (post the tax free savings allowance). Of course it should not be forgotten that the risk profile is very different between P2P and a savings account. If Ratesetter P2P sounds of interest I still have a referral link here. Sign up from that link and RateSetter will pay you £100 (and me £50) if you invest £1,000 with them for a year.
So far so good but then NS&I enters from stage right. I first started buying NS&I Index Linked Savings Certificates back in late 2007 where you could get RPI + 1.35% on your money. Over time that has been gradually eroded to effectively RPI. For me though they were still very attractive because they aren’t taxed meaning I’m currently getting 3.3% annually on any that mature which means I’m at least keeping pace with RPI inflation. That has all now changed with the government changing the index linking from RPI to CPI for any that mature and are reinvested from May 2019. If inflation remains unchanged that means the rate being paid reduces from 3.3% (RPI) to 2.4% (CPI) meaning I’m £1,023 worse off annually. Even so, sadly, 2.4% is still better than I can get on my cash anywhere else after tax with the added bonus that they are about as close to risk free as it’s possible to get today.
The end result of all of the above is that just when I thought I was going to be a little better off I’m now effectively worse off by £648 annually. Oh well, at least the sun is shining today and for us it’s soon also about to get a little warmer. Life’s still good.
As always DYOR.
#NSI #loses #lustre
