Savers should turn to shares for better returns

The Bank of England is widely expected to cut rates by half a percentage point to 0.5% on Thursday. David Kuo from the financial website The Motley Fool - Fool.co.uk - is urging savers to look to the stock market to lessen the pain caused by the Monetary Policy Committee's addiction to rate cuts.

"We fully understand the need for low interest rates at a time when the UK economy is in recession. But the exceptionally low interest rates are disproportionately punishing consumers who rely on the extra money earned from savings to supplement their income.

"That said, none of us have to grudgingly dance to the Bank of England's sorrowful tune. Savers can look to the stock market and either invest in individual companies that pay good dividends or invest in a portfolio of high-yielding shares for better returns.

"Currently the dividend yield on shares stands at 5%, which is almost twice that paid on some of the best instant-access savings accounts. Admittedly shares may remain volatile in the short term. But that should be less of a worry if we invest for the long term."