Savers suffer as interest rates cut again

By Tim Castle

LONDON (Reuters) - Savers are feeling the pinch after the Bank of England made a further cut in interest rates to a historic low of 1.5 percent on Thursday.

Some high street banks had already cut rates on instant access accounts to as low as 0.1 percent, with rates of up to 4 percent only available for those prepared to lock their money up for a period of time.

Lobby groups for pensioners and the elderly called on the government to offer extra help in benefits for those trying to eke out their retirement with income from their savings.

There was also support for plans from the opposition Conservatives to cut tax on savings accounts for lower income earners.

Interest rates have fallen by 3.5 percentage points since October as policymakers pull out all the stops to revive an economy facing its first recession since 1992.

Investment firm Legal and General said the rate cuts were starting to look futile and even counter-productive.

"We have reached the point now where only the fortunate few are really benefiting and savers are really starting to suffer," said L&G's Mortgages Director Ben Thompson.

"What lenders need more than ever are savers' deposits, and they are not going to get them if they can only offer paltry rates of interest."