The Bank of England has held the base interest rate at 4.5% as policymakers have opted not to rock the boat as they assess risks on the horizon.
Here’s what could be next for the UK economy, and what it means for savers and those looking to buy an annuity.
This article isn’t personal advice. If you’re not sure if an action is right for you, ask for advice. Tax rules can change and benefits depend on individual circumstances.
What’s next for the UK economy?
Inflation is expected to remain stubborn and is forecast to rise to 3.75% in the third quarter of this year, before falling back. But with a combination of the economy going into reverse in January, it means stagflation has reared its head.
All this leaves the Bank treading a fine line between controlling inflation and supporting growth.
Going forward, concerns about growth could increasingly outweigh worries about sticky prices. The job of policymakers is to look further ahead and try to assess how economic forces will impact consumer prices down the line.
Although the UK might appear to be an island cut off from further tariff threats for now, it also won’t be isolated from the turmoil given that its trading relationships stretch right across the world.
Downwards pressure on prices is expected to filter through later this year. So, we could see the next cut as early as May.
What it means for savings rates
The latest decision to hold rates where they are is good news for savers, who can expect to enjoy another month of robust rates as we head towards the end of the tax year.
It’s not just that rates are on hold this month, but when we do get cuts – possibly later this spring – they’re likely to be few and far between.
It's why there are such great rates sticking around, particularly within the easy access Cash ISA market. It means rich pickings as the deadline approaches to take advantage of your ISA allowance.
However, the hold on rates doesn’t mean you can afford to do nothing.
Rates might not be moving fast, but they’re on their way down.
If your easy-access rate has fallen, it’s worth shopping around for a better deal with online banks and savings platforms. And if you have cash that you won’t need for a year or more, it’s well worth considering fixing them while these deals are still around.
Open or top up an HL Cash ISA, Lifetimes ISA, Stocks and Shares ISA or Personal Pension (SIPP) to shelter your money from tax.
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What it means for annuities – is now a good time to buy?
The hold also spells good news for the annuity market.
Interest rates are one factor determining rates and this is why we’ve seen incomes soar in recent years.
The latest data from the HL annuity search engine shows a 65-year-old with £100,000 can currently get up to £7,585 per year from a single life level annuity.
The annuity market has stepped out of the shadows and taken centre stage with more retirees looking at whether now is the time to take the plunge and fix a guaranteed income for life.
It's important to do your research though, because once bought, you can’t unwind an annuity.
Different providers also offer different rates, so don’t just accept the first quote.
Using an annuity search engine to look across the market is a great way of making sure you get the best deal. Including details on your health can also give you an extra income bump.
The government’s free Pension Wise service can help if you’re over 50 and need guidance about your retirement options. You should also get personalised financial advice if you need it.
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