Re-investors will see income fall off a ‘savings precipice’

With more than 5.5 million fixed rate products worth over £110 billion maturing in 2010 - the largest number maturing in July (581,044) -  HSBC warns investors that with savings rates languishing at historic lows, many UK "re-investors" will see their investment income fall off a ‘savings precipice' this year.

Indeed, those investors in the over 2.7 million fixed rate products that have matured thus far in 2010, will have lost £722 million in income if they simply re-invested their savings pot in to similar products.   This steep loss is due to the falls of up to 3.01% in average best buy rates for these types of investments.

While investors are often keen to explore fixed rate products due to capital preservation and a guaranteed return, they are generally reluctant to lock significant amounts of money away for long periods.   Those who chose to reinvest their savings in popular shorter term products saw the biggest decline in income from their investment - 18 months (-46%), 3 years (-42%) and 2 years (39%).

This income fall is attributable to the significant drop in best-buy AER's available on fixed rate products which have dropped by up to 3.01% (18 month products).

For those investors in the 2.8 million fixed rate products that mature over the remainder of 2010, HSBC recommends that people seriously consider what the best possible home for their savings is.

David Wells, Head of Pensions, Savings and Investments at HSBC comments: "Many people find that fixed rate products offer them the security they need and the returns they desire for their savings goals.  However, those who want to reinvest savings from matured fixed rate products into similar deals, will find that their income drops significantly - an especially nasty shock for those who are preparing for retirement.

"We urge people to seek advice and consider all their options before simply reinvesting their savings in a similar product.  At HSBC, we can offer a range of options including several cautious income products which offer a more stable way to invest for long-term growth."