Savings Appetite At Record High But Rate Pressure Increases Cost of Inertia

Savings Appetite At Record High But Rate Pressure Increases Cost of Inertia

Savings volumes have reached at an all-time high during the pandemic, but downward pressure on market rates means that it’s important to be pro-active to avoid the increasing cost of inertia.

As a nation we’re saving more than ever before, with the National Savings Ratio having risen to a record high of 27 per cent[1] during the pandemic. But whilst deposit volumes have increased exponentially, interest rates have been under pressure. The Treasury’s decision in December to extend its Term Funding Scheme[2] has significantly reduced participating banks’ requirement for retail deposits and NS&I’s swinging rate cuts, applied in November, have meant that banks are no longer competing on rate with NS&I to attract savers’ deposits. 

At its meeting on Thursday 18 March, the Bank of England’s Monetary Policy Committee (MPC) confirmed that it would continue to hold the base rate at the current historic low of 0.1% and in its February meeting asked UK banks to confirm their readiness for processing negative interest rates. Whilst there is a prevailing consensus amongst industry experts that this fiscal tool is unlikely to be adopted and would prove counterproductive, a view shared by some members of the MPC itself, it nonetheless highlights the headwinds that rates have faced in recent months.

The consequences of each of these policy decisions will continue to be felt in the deposit market in the coming months, so it’s important for those with substantial sums held on deposit to be pro-active, as the cost of inertia continues to rise.

Longer term rates can provide peace of mind

The UK market average instant access deposit account rate has fallen by two thirds since January 2020 to just 0.19%[3]. Depositors wanting to avoid the uncertainty of variable rates might consider locking in a fixed rate for the medium to long term or a portfolio of fixed rates spanning different terms. This will protect their deposits from further downward market pressures and provide peace of mind that the value of their cash isn’t being eroded by sitting in a suboptimal account. Fixed term deposit rates currently available on the Flagstone platform include:

0.50% AER/Gross 6 Month Fixed Term Deposit - Exclusive to the Flagstone platform[4]
0.65% AER/Gross 12 Month Fixed Term Deposit[4]
0.75% AER/Gross 24 Month Fixed Term Deposit[4]
1.00% AER/Gross 36 Month Fixed Term Deposit[4]
1.25% AER/Gross 60 Month Fixed Term Deposit[4]

Ongoing access to 200+ accounts and exclusive rates

With a Flagstone account, clients have ongoing access to more than 200 deposit accounts from 48 banks including HSBC, Barclays, Santander and Nationwide, and can benefit from rates not available on the high street or online. 

The place for your cash to prosper

With access to all of this in one place, individuals, businesses and charities can open a Flagstone account safe in the knowledge that their cash can prosper on the platform.

To discuss opening a Flagstone account or referring clients to Flagstone, contact us or call us on 0203 745 8130.


[1] Source: Office of National Statistics – Households saving ratio
[2] Source: Bank of England -
Bank of England Term Funding Scheme Drawdown Period will run until 31 October 2021 (extended from 30 April 2021) and Reference Period will run from 31 December 2019 to 30 June 2021 (extended from 31 December 2020).
[3] Source: Moneyfacts - average rates at the start of each month
[4] Correct as at 18/03/2021. Rates are subject to change or withdrawal and are shown gross of Flagstone's Annual Management Charge, illustrating what the interest rate would be before the management fee is deducted. For Fixed Term Deposit Accounts, interest is paid at the end of the term. For details of how interest is paid on Instant Access Accounts and Notice Accounts, please refer to the Terms & Conditions for the specific account available on the platform. The minimum deposit required to open a platform account is £250,000. Dependent upon whether your client is an individual, looking to open a joint account, or acting on behalf of a company, charity, trust, SIPP or SSAS; different banks, accounts and rates will be available to them on the platform. The number of accounts available to clients may also be reduced dependent upon their domicile, residency and other factors.

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