Longer term fixed rate investors face savings precipice

New HSBC analysis reveals that longer term fixed rate investors in the UK are facing a savings precipice this year when they come to reinvest as rates for long term products continue to languish.

There are more than 4.7 million fixed rate products worth almost £92billion maturing in 2011, with the largest number maturing in October (534,648). The analysis reveals that those investors in the 2 million fixed rate products that have matured thus far in 2011 will lose £242 million in income if they simply re-invest their savings pot into similar products.

However, the current returns show a marked difference between long and short term products. While investors who put their money into 6 month and 1 year bonds will see an increase in the returns they receive by re-investing in the best buy products currently available, those who lock their money away for longer are likely to see the largest decline in returns, with 3 year products rates showing the largest fall in investment income.

For those investors in the 2.7 million fixed rate products 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 savers opt for fixed rate products for the guaranteed income and security offered. By fixing their hard earned savings into a product for a specific amount of time they can often earn higher returns when compared to other accounts available at the same time. However, those who want to reinvest savings from matured fixed rate products into similar products may 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. By diversifying their savings portfolios UK investors can ensure that their take the least possible risk of interest rates falling.   At HSBC, we can offer a range of options which offer a more stable way to invest for long-term growth."