Low returns for savers set to continue

Experts think rates will remain at 0.5 per cent until the end of next year and possibly for as long as three more years, adding to the pain for savers.

On the third anniversary of its decision to slash rates to a record low, this week’s meeting of the bank’s monetary policy committee is expected to be low key, with no change expected in rates or its “money-printing” programme.

The quantitative easing scheme was also unleashed three years ago and last month received a further injection of £50bn to take the total to £325bn, despite the risk to the country’s inflation rate.

The measures have been particularly painful for savers and those approaching retirement, although most homeowners have benefited.

Since the bank starting cutting borrowing costs, the typical savings rate has plummeted from 6.52 per cent in 2008 to 2.78 per cent.

For those who reached retirement age in that period, annuity rates fell from 6.93 per cent to 5.86 per cent. This is because annuities are linked to yields on government bonds which have been reduced by the quantitative easing programme.

The bank’s governor Sir Mervyn King has repeatedly expressed his sympathy for savers but has insisted that the stimulus measures were needed to help the economy.