Savings and coronavirus

Many people will find themselves relying on their savings to see them through the impact of the COVID-19 pandemic and its effects on the economy. So how can your savings help during this unprecedented situation?

Many people will find themselves relying on their savings to see them through the impact of the COVID-19 pandemic and its effects on the economy. So how can your savings help during this unprecedented situation?

Anelda Knoesen
From the Money team
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Posted 4 DECEMBER 2020

Please note: The information in this article was correct at the time of publication on 4 December 2020 but, because of the impact of COVID-19, things are changing rapidly. We aim to keep this page updated, but please check with your bank directly to confirm any details.

What are banks doing to help savers during coronavirus?

Banks and building societies are taking different approaches to helping customers during the COVID-19 outbreak. They realise that many people could be facing cash flow problems and, until promised government help becomes available, might need to use their savings to pay their mortgage and other household expenses.
Interest rates have been low in recent years and, to access the best rates available, many savers have put money into higher-paying accounts. But these kinds of accounts usually have special rules around them enabling them to pay higher rates, for example:

  • Fixed term accounts – these can offer a higher rate of interest if you agree not to take money out for a set period, say 1-5 years. Usually there’s a penalty for early access to your account or closing it before the end of the term.
  • Limited withdrawal accounts – these limit the number of withdrawals you can make in a year and apply charges or significantly drop your interest rate if you exceed it.
  • Notice accounts – you need to tell your savings provider a fixed time in advance of when you want to withdraw money, otherwise you could face a penalty.

Although no one wants to use up their savings, often the purpose of putting money away is precisely to tide you over in a difficult situation. And while there may be penalties for accessing fixed term savings accounts, these need to be weighed up against the possibility of getting into debt.
To help customers facing uncertainty around their finances, many banks have become more flexible about access to savings accounts. What’s being offered varies from organisation to organisation. If you’re in financial difficulties because of COVID-19 and you need to access your savings early, contact your bank or building society to see if they can help.

What about access to Lifetime ISAs?

Lifetime ISA rules are set by the government rather than the individual providers. To help during COVID-19, the government has reduced the 25% penalty for withdrawing money from your Lifetime ISA for anything other than buying a home or retirement to 20%. In effect, this means that you’ll lose the 25% cash bonus that the government gives to Lifetime ISA holders. This measure will stay in place until 5 April 2021. 

What happens if I withdraw money from a cash ISA?

If you withdraw money from your cash ISA, you’ll lose the tax-free benefit on this amount.

How can I access my savings?

Most banks and building societies are asking people to avoid going into branches, if possible. And some branches may be closed, be open for shorter hours or have special times for vulnerable customers.
Many savings accounts can now be operated online, so you might be able to move your money from a savings account to a current account.
Check your provider’s website to see what they’re suggesting you do and for the latest advice.

How can I contact my bank about my savings?

Banks and building societies are trying to keep their phone lines open for those in greatest need, while having fewer people to answer them because of illness. They all ask that you don’t visit a branch unless it’s absolutely necessary. And if you have symptoms of COVID-19, you should self-isolate and not visit a branch at all.
Helplines are very busy, so there are long wait times. Please check your bank’s website to see if they’re offering online forms or email addresses you can use.

Are my savings at risk because of coronavirus?

Because of government support following the financial crisis, it’s unlikely that banks will fail.
The Financial Services Compensation Scheme (FSCS) can cover your money if your bank or building society were to fail, but where you hold it could affect how much you would get back. The £85,000 total is per banking licence. If you have money with different banks in the same group that operate under one banking licence, the limit will apply to all the accounts that you hold, not each separate account.
Use the FSCS tool to see how much of your money is protected
If you hold more than £85,000 in one account or under one banking licence, you could consider moving money to bring you under the limit. But you’d need to take into consideration any penalties you might have to pay.

Savings, coronavirus and fraud

Savers should be on high alert for fraudsters trying to take advantage of the current coronavirus situation.
No bank will ever:

  • ask you to disclose your PIN number or other passwords for your accounts, on the phone or via email
  • encourage you to move funds from your own account into a ‘safe’ account 

If you get a call asking you to do this, hang up straight away.

See more on avoiding coronavirus scams

Other help: payment holidays

The government has extended the deadline for applying for a mortgage holiday until 31 March 2021. If necessary, you can ask your lender for a three-month payment holiday. But don’t stop paying your mortgage without agreement from your lender.
Some lenders are also offering payment holidays on loans and credit cards. If you’re having financial difficulties, it’s best to contact your provider to see what they can offer.
For more information on payment holidays see:

If you’re finding it hard to make ends meet, make sure you’re claiming everything you’re entitled to and check whether you have any insurance policies that cover loss of income.

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