PM promises help for savers as rates plummet

by Gill Montia

Story link: PM promises help for savers as rates plummet

The Bank of England’s Monetary Policy Committee is widely predicted to cut the base rate again this week, with potentially disastrous consequences for millions of savers.

At 2%, the base rate is already at its lowest since 1951 and economists are forecasting a further cut of up to 1% on Thursday.

For pensioners in particular, income has been eroded by falling returns from savings since the Bank began to aggressively cut rates in November.

However, Prime Minister Gordon Brown has promised help in the months ahead.

Speaking on the BBC’s Andrew Marr Show yesterday, Mr Brown made assurances that he is very conscious that people who have acted prudently may now feel they are being punished by the sharp fall in rates for savers.

Options available to redress the situation include increasing the allowance on Individual Savings Accounts (ISA), the income from which is tax free, and reducing income tax rates on savings for over 65s

Millions of homeowners with tracker mortgages have already benefited from the recent cuts in the base rate but for savers a further reduction in January could leave large numbers of people gaining interest on their accounts at less than 1%.