April 25, 2024
Money

UK falls into recession: What to do with your money now, from savings to pensions


The UK economy fell into recession at the end of 2023, new figures released today show – but what does this mean for your personal finances?

A recession is defined as two consecutive quarters – so two three-month periods in a row – where gross domestic product (GDP) declines. GDP is a measure of the size and health of the economy. When there is a recession, it generally means there is less money being pumped into the economy and people are spending less.




This can lead to employers cutting their hours and reducing their workforce. It could also mean less chance of a pay rise and fewer jobs available. In terms of borrowing, businesses may become stricter when deciding to lend money out – which means you could find it harder to get a mortgage or credit card.

In an update today, the Office for National Statistics (ONS) revealed GDP shrank by 0.3% between October and December 2023. This followed a decline of 0.1% between July and September 2023, therefore meeting the technical definition of a recession, as we’ve had two quarters of negative growth. However, the data released today is just an estimate and can be subject to revision.

What to do with your savings

Savings rates have made huge improvements over the last year – and the good news is, there are still deals that pay above the rate of inflation, which is currently sat at 4%. Ideally, you should look to have three to six months’ worth of essential expenses put away.

Always make sure the savings account you pick is covered by the Financial Services Compensation Scheme (FSCS). This scheme covers cash up to £85,000 per financial institution if the bank or lender goes bust.

The highest easy-access rate right now is 5.15% from Coventry Building Society, although keep in mind you can only make three withdrawals a year – after this, you’re charged 50 days’ interest of the amount withdrawn. Cynergy Bank, Leeds Building Society and Close Brothers all pay 5.1% and there are no withdrawal restrictions.

If you want to lock your money away into a fixed rate account, you will get a bigger return compared to regular easy-access accounts – but you can’t make withdrawals whenever you like. Do keep this in mind, in case you may need to access your money in an emergency. You may not necessarily want to put all your savings into a fixed rate account without having a buffer elsewhere that you can access. The top fixed-rate account right now is from SmartSave and pays 5.21% fixed for one year.



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