Some good news for savers at the end of 2010? Well, possibly!

2010 and the end of 2009 has not been a vintage season for savers with the Bank of England’s base rate remaining at 0.5% for all this year and part of last year. An unprecedented period of around 20 months (05 March 2009 to 0.5%) has elapsed since the based rate sank to this low level. With inflation on the rise (the Consumer Prices Index (CPI) rose to 3.30% in November 2010 from 3.20% in October 2010) the real capital value of savers deposits in most cases is falling in real purchasing value.

For those with higher levels of deposit, there is also the problem of maintaining levels of deposit that enjoy the current deposit compensation/protection limit of holdings below £50,000 in the UK. Those deposit taking institutions that use the European protection system see those limits increase to €100,000, which is about £70,000 in sterling, although this fluctuates all the time with currency movements.

From 31 December 2010, The Financial Services Authority (FSA) has announced this month (December 2010) that the current UK deposit guarantee/compensation limit is to increased to £85,000, from £50,000. This will at least have the beneficial effect of reducing the need to open various accounts and spread deposit funds around for those investors with significant funds to invest wishing to stay below this limit.

Further details of this announcement can be found at the Financial Services Authority website here: http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/181.shtml

The way you deal with your deposit funds is a key point to financial planning and this planning needs to be considered carefully, especially with this new deposit protection limit change in mind. A regular review of savings strategy is always worthwhile to ensure that the best is being made of your capital with historically low bank base rates and rising inflation. The beginning of a New Year might be a good opportunity based on your circumstances and needs?

At the same time, you may wish to check your position with regards to the use of this year’s Cash ISA allowance of £5,100, if you have not used this in full.

With this in mind, it should be noted that we are all different and your savings strategy will be individual to your needs, such as access and your overall tax position. Therefore, this article should not be seen or used as individual advice.

Seek Independent Financial Advice (IFA) for your circumstances. Have a great New Year.

Churchouse Financial Planning Limited can be contacted in Guildford, Surrey on (01483) 578800.

Keith Churchouse

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.