Turn over a new leaf on your expiring fixed rate bond this autumn
Savers whose fixed rate bonds are due to mature should be prepared to look for new options to maximise their saving pots, according to analysis from MoneySupermarket.
The comparison site shows savers could miss out on over £477 if they fail to switch products once their fixed rate bond expires. MoneySupermarket looked at the interest across a number of bonds both during their term and once expired, and calculated the interest that could be saved by switching to find a better deal. For example, for someone who invested £15,000 in Cheshire Building Society's market leading one-year fixed rate bond in 2011, the interest earned during year one will be £526.50 on an AER of 3.51 per cent. However, if they opt to renew into the current Cheshire Building Society one year savings bond which pays 2.50 per cent AER, they will earn only £375 in interest over the next year.
Yet by switching to a more competitive rate this autumn, such as State Bank of India's one year fixed rate bond with an AER of 3.33 per cent, someone could achieve £499.50 in interest on maturity next year.
Kevin Mountford, head of banking at MoneySupermarket said: "Five years on from the start of the financial crisis, savers will have continued to struggle against a low interest rate, combined with the eroding effect of high inflation, which has made it difficult to gain a positive real return on savings. However, this means that consumers should make the most of every opportunity to act and take advantage of strong rates once bonds mature.
"Autumn has traditionally been a peak period for people renewing fixed rate bonds and many savers will be seeing their bonds reach maturity over the next two or three months. The fixed rate bonds that are currently available represent a great way of maximising returns as long as savers can afford to lock their money away for the term, and remember to check when the term matures. Our analysis shows a significant amount can be saved simply by shopping around for a better deal, so it really pays to be alert.
"Being vigilant and writing a reminder in the diary is important as savers can't always rely on their bank to remind them their product term has come to end. Some providers will automatically enrol you into another bond if you fail to respond to any maturity notification or fail to act, locking away your savings for the term of the product, or they could be placed in an account paying a low rate of interest.
"It's important to remember that once the bond reaches maturity, the product has served its purpose, it's time to get online, shop around and switch to a more competitive deal. Savers need to be quick as some of the best products may not be available for long."