When you’re a pensioner, you have a particular set of criteria to consider when finding places to save your money. In comparison to earlier on in your life, you now have a much shorter investment timeline, which can have a significant bearing on what savings products are suitable for you. On top of that, your circumstances significantly influence what savings accounts are an advisable option for your cash.
Here, in this article, we look at the pros and cons of easy access saver accounts regarding pensioners' specific needs.
What Exactly Is An Easy Access Saver?
An Easy Access Saver is an account where customers can invest their money and earn a specified interest rate. The main distinguishing feature of an Easy Access Saver compared to other savings products is the ability to withdraw money quickly and easily with no penalties for withdrawing.
They vary from regular current accounts due to the better interest rate cash earns within them.
Pros Of An Easy Access Saver For Pensioners
Of course, the most significant advantage of an Easy Access Saver is that it is easy access. This feature is fantastic, as you may need access to your cash quickly for everyday living costs now that you’re no longer earning a salary. While you may be receiving an income from your pension, you could invest some of your cash into an Easy Access Saver to help make up the shortfall between your pension income and your outlays. Being able to access your savings with ease can be imperative at times.
Most importantly, the bank doesn’t penalise you for making withdrawals. Other products, like a fixed rate bond, can charge you a fee or reduce your interest for the months you take out funds.
Known Amount of Interest
Some Easy Access Saver accounts will offer a headline amount of interest that you can earn on your savings; excellent if you’re trying to figure out how much money your savings will make. It can help you budget for the future more, which is particularly useful given that you do not have your monthly salary. Products like Stocks and Shares ISAs will come with an unknown amount of interest.
Can Be Tax-Free
Depending on your circumstances, the amount of interest you earn on your savings within an Easy Access Saver account can be tax-free. This will be down to how much interest you earn across your portfolio of savings accounts. However, most people will fall under the £1,000 personal savings allowance. If you are in a higher rate tax bracket, that amount drops to £500 before you have to start paying tax on any interest earned.
Open Multiple Accounts
Unlike Cash ISAs or Stocks and Shares ISAs, one of the most significant benefits of Easy Access Saver accounts is that you can open several at the same time. If you find an account with an attractive interest rate, you can pay into it whenever you like or need.
Small to Large Amounts To Invest
Perhaps one of the most significant disadvantages to Cash ISAs and Stocks & Shares ISAs is they have a limit on the amount you can invest in them. Investments in Cash ISAs and Stocks & Shares ISAs, for 2020/21, are capped at £20,000. That limit will be far too small for some pensioners with large amounts of savings built up. What can be great about Easy Access Saver accounts is that some allow you to invest a high amount of cash. However, importantly, the same accounts are still open to investors with a much smaller amount of capital.
Cons Of An Easy Access Saver For Pensioners
Historically Low Interest
Perhaps one of the reasons that Easy Access Saver accounts are not always suitable for some pensioners is that they historically have had low interest rates. Providers set the interest rate, but they will rarely beat other forms of savings accounts or bonds available on the market. A low interest rate may be all you need if you just want somewhere safe to put your cash and let it earn a small amount of interest, but keep that all-important easy access. However, for many, that interest rate simply won’t make their savings grow to the amount they require.
Potential Amount Limit
While many Easy Access Saver accounts have very high limits attached to them, some will have set amounts that may be too low for you to consider. You may even find that even the products with the highest amount limits are too low for you. While some accounts allow you to save millions, it is still important to bear these limits in mind.
Rates Can Change
Easy Access Saver accounts offer variable interest rates. The result is that while you may open an account for a certain amount of interest, the provider may change what interest rate it offers a few months down the line. Therefore, it pays to stay on top of the interest rates available elsewhere. If you don’t, you may not get the highest return possible or, indeed, the rate you had initially signed up to.
Inflation can quickly eat away at any of the money you make on your savings with an Easy Access Saver account. Owing to the usually low interest rates these accounts offer, you may find that inflation has eaten away at the purchasing power of your original investment over a year.
Are Easy Access Savers A Suitable Investment For Pensioners?
Easy Access Saver accounts are suitable for pensioners as long as the advantages fit your needs. If you find that the disadvantages simply add up to making this a bad investment for you, depending on your circumstances, it may be better to use other investment products.
Ultimately, the biggest drawback to these accounts is the low interest rates. They can be so small that there is not always a point in using them, once inflation has been taken into account. However, that is not a pensioner specific problem. It is a drawback for anyone. Despite this, there will be some people who do need a savings account that allows them to make penalty-free withdrawals, which can make Easy Access Saver accounts an ideal product.