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Savings expert warns of 'closing window' for retirees – but shares 'potential lifeline'

Retirees are facing a shrinking window for high savings returns as interest rates fall month on month, but a “crucial shift” offering a “potential lifeline” could be underway, an expert has said.

Data from Moneyfactscompare shows a decline in top online one-year fixed-rate ISAs, dropping from 5.01 percent in January 2024 to 4.72 percent today.

Interestingly, the best three-year fixed rate ISA has only dipped slightly, from 4.65 percent to 4.41 percent.

Adam Thrower, head of savings at Shawbrook said this trend suggests locking into a longer-term account now could be a “wise move” to secure a higher return before rates fall in line with a predicted base rate cut.

Mr Thrower said: “This is a clear opportunity for retirees to solidify their financial future.

“Interest rates on longer-term savings accounts, both ISAs and non-ISAs between three and seven years are fairly high and stable, but with potential future base rate declines on the horizon, locking in now could be a game-changer.”

Research by Shawbrook found that 41 percent of people over 55 plan to use their savings for retirement. However, a focus on short-term, easy-access accounts might be costing them a valuable opportunity.

The trend towards longer-term fixed is growing, according to Shawbrook. In April, it said demand for its new three and five-year ISA accounts surged by over six times compared to the previous quarter.

As the Bank of England’s message of potentially higher interest rates for a longer period seeps into the market, longer-term fixed rates are holding steady compared to shorter-term rates.

For the one-third of over 55s planning to make the most of their savings when they stop working, Mr Thrower said the window to lock in an inflation-beating rate for the years ahead is “closing fast”.

He said: “Locking in now with today’s advantageous rates guarantees a predictable income stream for years to come, regardless of future rate cuts.

“However it is prudent to remember the unexpected can always happen – if base rates do increase, savers who have fixed could jeopardise higher returns.”

While longer-term savings accounts offer a compelling option, consulting with an independent financial advisor is suggested when retirement planning.

They can assess individual circumstances and recommend the most suitable account type and term length to meet a person’s specific needs, ensuring they maximise their income potential.

Mr Thrower said: “Don’t let the future of your retirement income depend on volatile interest rates.

“While this may be a time-sensitive opportunity to secure an element of your financial well-being, it’s important to understand the implications if interest rates were to unexpectedly rise. Talk to your advisor and explore the benefits of longer-term savings accounts.”


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