Large numbers of savers risk a significant fall in the returns they get on their investments as savings accounts interest rates are being cut.

Those most likely to be hit are savers with money in high return but short-term fixed rate accounts.

According to research carried out by Moneyfacts, the personal finance data firm, the average rate offered on a one-year savings bond has dipped from 6.2 per cent to 3.8 per cent following successive cuts by the Bank of England in the basic rate.

The Bank’s rate is now just 2 per cent, down from 5 per cent at the beginning of the autumn.

Cash held in fixed rate Individual Savings Accounts (Isas) could see a particularly marked fall in returns next year as banks and building societies introduce new, lower rates.

Michelle Slade of Moneyfacts said: “Savings rates are at their lowest levels in nearly five years and when the latest cut filters through at the beginning of next year, the situation is likely to be even worse.”

The research found that financial institutions have reduced rates on Isas, which offer tax-free interest, by more than the cuts imposed on easy-access savings accounts.

Over the last year or so, Isa rates have fallen by an average of 2.05 per cent, while the average decline for easy-access accounts has been 1.97 per cent.

Standard deposit accounts have not escaped the squeeze, however. The average return on savings of £5,000 has slipped to 2.3 per cent from 2.49 per cent in April 2004.

Isa savers are being urged to review the rates they are being offered but also to take care that they do not jeopardise their tax-free status if moving to another savings institution.

News update from London accountants Carter Backer Winter (CBW)