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How to improve your poor performing retirement savings

According to The Telegraph, after a series of brutal cuts to both old and new savings accounts in the last 12 months, banks and building societies have reduced the interest paid to savers by almost £1bn in a year.

The latest results mean that millions of individuals have been forced to accept lower returns on their savings over the last year. According to a document released by The Bank of England, the total amount of money collectively placed into savings accounts by UK account holders rose by £55 billion between March 2013 and 2014, meaning that whilst rates have fallen the demand has increased.

During the same period, UK savers had placed £481 billion of their money into accounts at an average rate of 1.04%. However, as of March 2014, this average rate has dropped to just 0.75%.

With the 6th anniversary of the 0.5% interest rate set to pass before the Bank starts raising rates, the future still looks bleak for older savers who are reliant on their savings during retirement.
According to Simon Rose from the campaign group Save Our Savers said, "The Government might have had a 'Budget for savers' but the elephant in the room is interest rates, which have been left so low that many people who rely on the returns from savings are struggling to maintain living standards."

During the period of low interest rates, some UK savers have preferred instant access accounts, which provide easy access to their savings rather than money locked away, generating very little return.

Given the poor crop of saving accounts, how can those in or facing retirement make the most of their money during a time of low interest rates?

1. Regularly review how your savings accounts are performing
It is important to regularly review your savings accounts to ensure they are earning competitive rates of interest. To help put you in the right direction, keep an eye out for our Best Buys on the Retirement and Investment Solutions website. You should also make sure you use up your full cash ISA allowance as any interest received on your savings is tax free. As of July 2014, the existing cash and stocks ISAs will be merged to create a single ISA, with an increased annual limit of £15,000, giving more flexibility for savers to earn tax-free interest. The Financial Services Compensation Scheme provides cover for deposits up to £85,000 per person, per authorised firm. If you are in a position where you have more than £85,000, make sure you spread your money around different providers.

2. Review investment avenues for future financial returns
In order to generate a real return from your savings, investing in different asset classes, which suit your financial objectives and attitude to risk may reap more financial rewards in the future. Known as diversification, your money should be spread across different sectors and types of assets, which are suitable to your risk appetite. Options include shares within the stock market, corporate bonds, funds and tactical asset allocation. When investing your hard-earned cash, it is important that you review your investments regularly as some stocks or markets may be seasonal, which may produce peaks and troughs during the investment period. In order to help those savers who have had the value of their finances eroded by the low interest rates, a pensioner bond will be issued by the NS&I for everyone over 65 from January next year. Interest rates are yet to be set, but current estimates are 2.8% for a one-year bond and 4% for a three-year bond.

If your retirement savings are struggling to perform effectively off the back of the low interest rates and poor savings accounts, Retirement and Investment Solutions will tailor advice and recommendations to your personal circumstances, ensuring that any investment avenues you may consider to help boost your savings work for you and your needs.

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