MILLIONS of savers are breathing a sigh of relief at the decision by the Bank of England to leave the base rate at 0.5 per cent this month – the first month since September to escape a rate cut.

But life hardly gets easier for those needing income from savings. Investec Private Bank says almost 1.5 million older people depend on interest from savings for more than ten per cent of annual income, and nearly 600,000 rely on savings interest for at least a fifth of their income.

There is little chance of an early bounce in rates. Ray Boulger at mortgage broker John Charcol thinks the base rate will hold this year and probably into next, depending on the strength of economic recovery.

Andrew Hagger, at moneynet.co.uk, said: “Unchanged rates are a minuscule crumb of comfort if you compare today’s savings rates with those applying last October.

“At that time, before six consecutive monthly base rate cuts, someone with a £50,000 nest egg – perhaps secured by buying a smaller home – received annual income of £2,584 (net of 20 per cent tax) in a one-year fixed rate bond at an average 6.46 per cent.

“That same person now faces a drastically reduced annual return of just £1,112 (also net of 20 per cent tax) at an average rate of 2.78 per cent.

Facing a monthly loss of £122, many relying on savings income will dip into capital to make ends meet.”

Millions of pounds are sloshing around that could benefit from decent rates: Close Brothers closed a twoyear fixed term Premium Gold account paying 4.3 per cent on minimum £10,000 deposits within ten days, and says a new Premium Gold Account – at a lower rate – will follow shortly.

Investec High 5 – a threemonth notice account based on the average of top five rates on moneyfacts.co.uk website – pays 3.17 per cent AER on minimum balances of £25,000. Interest is monthly or credited to the account.

At Cater Allen Private Bank, part of Abbey owner Santander, two and three-year savings bonds on minimum £5,000 deposits offer 4.11 per cent AER. After one and two years have elapsed, savers can get out with no penalty.

Mr Boulger said: “To lock money away now at rates fixed for three to five years is not sensible. It is a gamble that rates will not go up again significantly within that period.”

He advises savers to go for instant access accounts paying three per cent-plus, usually including a bonus.

Kevin Mountford, head of banking at moneysupermarket.com, says savers should not accept returns near the 0.5 per cent base rate when banks have to attract savers’ cash.

He urges them to find accounts paying a bonus for a specified period – usually the first year – and to move fast when the bonus expires.