Savers withdraw record amount from banks

Savers withdraw record amount from banks
The British Bankers' Association said that customers withdrew £2.3bn in January, the biggest drop since records began.

By Paul Farrow
Last Updated: 5:19PM GMT 24 Feb 2009

The BBA said personal deposits fell by £2.3bn as spending drained cash and savers sought alternative ways of getting a return on their cash. The previous high for falling deposits was £1.5bn in 1997.

David Dooks, BBA statistics director, said: "It is the biggest monthly fall in a decade. A fall in deposits in January reflects a tendency to draw on cash to pay off credit cards after Christmas, or to move into alternative financial products paying a higher return."

With interest rates at record lows savers are having to find other ways to get a return on their money. A recent survey showed that savers are preparing to abandon their tax-free Individual Savings Accounts (ISAs) because of lack of money and falling rates.

The uSwitch survey shows that 4.3 million savers are planning on withdrawing money from their accounts, losing the advantage of the tax-free status. The research suggests that, with the average cash ISA saver having a balance of £2,200, savers are set to withdraw £9.5 billion over the next year.

On the other hand, sales of corporate bond funds, which are paying yields of 5pc or more are proving popular among investors looking for a lower risk investment that pays an income. Bonds funds accounted for two in every three unit trusts bought in December and they continue to attract the lion's share of investors' money in 2009.

Dooks played down suggestions that customers had lost faith in the banks and said that deposits had risen in November and December.


http://www.telegraph.co.uk/finance/personalfinance/savings/4799679/Savers-withdraw-record-amount-from-banks.html