The Bank of England’s Monetary Policy Committee (MPC) voted eight to one to increase rates from 0.5 percent to 0.75 percent. This marks the third rise in a row.
This could be good news for savers as many banks will consider raising their interest rates, meaning people can get more for their money, however an expert warns Britons should be looking elsewhere.
Express.co.uk spoke exclusively to Ben Pollard, CEO and Founder of Cushon about the interest rate increase and how it will impact savers.
He said: “High street banks aren’t obliged to adjust their savings rates in response to the latest Bank of England interest rate hike.
“Even if they do adjust rates, they’re unlikely to translate to any great moves from already low rates and it could take months for any adjustments to come through anyway.
READ MORE: State pensioners could boost their income up to £89 every week – are you eligible?
“The latest HMRC stats show that 75 percent of ISA savers are still in cash and with inflation rates at a 30-year high and expected to hit eight percent and above, returns for most savers are likely to be negative in real terms.
“Cash is not great when inflation is on the increase. Savers really need to think carefully about what they’re saving for, is it for the short term or the long term and if the long term, is cash really the right thing for them or should they be thinking about investing?”
With inflation reaching 5.5 percent, any interest given on savings account are unlikely to match this amount.
Most banks are offering competitive rates on different accounts so it may be worthwhile shopping around to see where people can get the best options.
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As they are effectively earning a lower salary, both them and their employer pay lower National Insurance contributions, which often means take-home pay will be higher.
Better still, an employer might pay part or all their National Insurance savings into their pension too, but this is their own decision.
Currently, the minimum salary at which workers pay National Insurance is £9,568.
However, the Chancellor Rishi Sunak will increase the income threshold at which people pay the levy by 3.1 percent to £9,880 from next month.
National Insurance could cost the average worker a whopping £2,706 a year from April.
The average worker earning £30,000 a year will pay an extra £255 in National Insurance from April 6.
It will lift their annual National Insurance bill to £2,706, a staggering nine percent of their salary.
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