\n\t\t\t\t\tAfter the holidays, UK savers are expected to move money into ISAs, pensions and savings accounts to protect returns\t\t\t\t\t <\/p>\n
After the excesses of December, January brings a marked change in how the nation thinks about money<\/a>.<\/p>\n Festive spending gives way to the reality of credit card statements<\/a> landing, prompting households across the UK to reassess what they have left, where it is sitting and if their money is still working hard enough.<\/p>\n This year, that reassessment carries a heightened sense of urgency, as households face elevated living costs<\/a>, falling interest rates and frozen tax thresholds quietly pushing more people into higher tax bands<\/a>.<\/p>\n The i Paper spoke to experts to find out what their clients are doing with their money, what savers should consider in the new year and what they need to bear in mind before taking any drastic steps.<\/p>\n New FeatureIn ShortQuick Stories. Same trusted journalism.<\/p>\n Where people are moving their money<\/p>\n Anthony Villis, managing director at financial planning firm First Wealth, said he is seeing clients redirecting their funds into three main areas:<\/p>\n Early ISA contributions to ensure full use of tax-free allowances before April.<\/p>\n Pension top-ups for those seeking to maximise tax relief.<\/p>\n A shift of cash into diversified investments designed to outpace inflation over the medium to long term.<\/p>\n Many are doing so to protect funds against tax and ensure they don\u2019t lose money in real terms during a high inflation<\/a> environment.<\/p>\n Despite this movement, Villis stressed that having access to cash \u2013 that isn\u2019t locked away \u2013 continues to play an important role.<\/p>\n \u201cThe starting point should always be the same question: how much cash do I actually need? <\/p>\n \u201cCash remains essential for emergency funds, short-term spending and providing stability during market volatility. <\/p>\n \u201cBut beyond those purposes, it can be a surprisingly poor long-term home for wealth.\u201d<\/p>\n Rethinking cash savings<\/p>\n One of the clearest changes Villis is seeing is a growing reluctance to leave large sums sitting in cash without a clear purpose.<\/p>\n With interest rates<\/a> falling from recent highs, now down to 3.75 per cent, while inflation remains above target at 3.2 per cent, many easy-access savings accounts are now delivering negative real returns, prompting savers to question long-standing habits.<\/p>\n Locking money away for long periods of time can offer higher returns than easy-access accounts \u2013 where you can take out your money at any time.<\/p>\n This is because even though rates may not be higher, they will accrue more interest over time and will be protected against any drops in interest rates \u2013 which are expected in 2026.<\/p>\n Lower interest rates tend to mean banks lower their savings rates<\/a>, meaning consumers get a lower return on their money.<\/p>\n Sally Conway, head of savings at Shawbrook Bank, said: \u201cAnticipation of interest rate cuts by the Bank of England in the new year is fuelling a rise in demand for fixed rate accounts, as further savers look to lock in current, higher returns. It\u2019s important though to assess your individual financial goals and consider whether a longer-term commitment aligns with your financial needs.\u201d<\/p>\n Richard Dana, founder and chief executive of mortgage and savings platform Tembo, added: \u201cWith the base rate now below 4 per cent, there\u2019s a clear shift towards fixed-rate savings, as people look for certainty and want to lock in a competitive return while rates remain relatively high by recent standards.\u201d<\/p>\n Many of the top fixed deals offer rates of over 4 per cent but are likely to fall if the Bank of England cuts the base rate. <\/p>\n For those who may want the flexibility, there are many easy-access accounts offering decent returns with Chase leading the pack with interest of 4.5 per cent.<\/p>\n Resetting priorities after Christmas<\/p>\n Despite the want to grow finances, experts warn it is important to review funds as a whole first.<\/p>\n Jennifer Crichton, senior wealth planner at Killik and Co, said the focus should initially be on strengthening financial resilience rather than chasing returns.<\/p>\n \u201cPeople should first prioritise paying down high-interest debt, rebuilding a cash buffer (at least three months of essential expenses), and making sure any short-term savings aren\u2019t left idle in current accounts, where a lack of interest makes cash more vulnerable to inflation.\u201d<\/p>\n Crichton highlighted that instant-access savings accounts and NS&I products remain suitable options for emergency reserves but warned that leaving larger balances in current accounts can quietly erode spending power over time.<\/p>\n From there, she said attention should turn towards long-term investing<\/a>, particularly through ISAs<\/a> and pensions, despite recent policy changes making the landscape more complex.<\/p>\n Making the most of tax allowances<\/p>\n Frozen tax thresholds and potential changes to tax rates have increased the importance of using available allowances wherever possible.<\/p>\n Although the cash ISA limit is being cut to \u00a312,000 for anyone under the age of 65, this doesn\u2019t come into place until April 2027 so people still have time to make the most of it.<\/p>\n When investing for the long term \u2013 typically five years or more \u2013 with an ISA or pension, savers will benefit significantly from the tax-free compounding of returns.<\/p>\n Camilla Esmund, senior manager at interactive investor, said: \u201cMaking the most of your \u00a320,000 ISA allowance each year can help you build a sizeable nest egg and give you more financial freedom once you reach later life. <\/p>\n \u201cRemember there are managed offerings on the market if you want to invest for your long-term future, but do not want to make investment decisions yourself.\u201d<\/p>\n With just over three months remaining until the end of the tax year, acting now is crucial, as unused allowances are lost rather than carried forward.<\/p>\n