Nine of the UAE's best bank accounts to improve your pandemic savings

As the world prepares to mark World Savings Day on October 31, it could seem to be ironic that just as people are renewing their give attention to accumulating their nest eggs because of spending less during the Covid-19 pandemic, rates of interest are in all-time lows.

Take, for example, the three-month Emirates Interbank Offered Rate (Eibor), which at the start of 2020 stood at 2.15 %. Today, it stands at 0.40 %, a massive 80 % drop, says Ambareen Musa, founder and leader of Souqalmal.com.

“This sharp decline in rates of interest may be very good news for borrowers, nonetheless it definitely spells bad news for savers, especially those that rely on savings accounts and term deposits to keep their dirhams growing.”

Even term deposits, which traditionally have offered better returns for those willing to lock in their funds for varying lengths of time, have exceptionally low rates at the moment, with many banks offering about 0.4 % to 0.5 % on a 12-month fixed deposit.

“With rates of interest on term deposits touching new lows, it wouldn’t seem sensible to lock in your cash in that product for long tenures. Alternatives like offshore savings, debt funds, or even prize-linked savings accounts will probably be worth considering for those seeking to retain a low-risk portfolio,” Ms Musa says.

Don’t expect any respite in the near term - the US Federal Reserve has said it expects to keep rates near zero until 2023. Meanwhile, subdued lending activity by many UAE banks does mean there’s less pressure for them to attract additional deposits, plus some banks have continued to reprice their savings products down lately and weeks.

Still, some deals available in the market are still better than others, making it worthwhile for savers to see if indeed they can get an improved rate. In the worst-case scenario a checking account can also be costing you more money in service fees than you earn in interest in the event that you can’t keep up with the required minimum balance or are making frequent withdrawals.

Saif Al Alkeem, head of wealth management and priority banking at Abu Dhabi Islamic Bank, says that as a result of the gradual rate reductions in the last couple of years, many customers are exploring options such as investment plans or mutual funds to create their money work. “Meanwhile, other customers have chosen to control their contact with volatile markets and kept their cash in a checking account.”

Regardless of the low-rate environment, experts concur that it’s very important to savers never to lose track of the value that savings have - whether it’s reassurance, or providing much-needed funds for unforeseen circumstances. While many may be drawn to the chance of higher returns, the old adage - the bigger the returns, the greater the risk - still holds true.

“With everything that has taken place this year, persons who had savings have obviously fared greater than the kinds who didn't,” says Tooran Asif, head of consumer banking at Mashreq Bank. “For the future, there are always possibilities to save, it’s up to discipline of a person to keep a tab on their expenses.”

Mohammed Qasim Al Ali, leader at National Bonds, says it’s important that people distinguish between saving and investing. Buying asset classes like equities, which are highly volatile, risks a lack of funds, he says.

“For those who are looking to develop their savings to a stage where they can get started investing, saving accounts or term deposits are usually the very best approach, where you get access to your money as so when you need it, and it’s protected through the regulator and the institutions involved," Mr Ali says.

That’s a message many savers seem to have already taken to heart, with data from the UAE Central Bank showing that the volume of deposits held by banks from individuals is continuing to grow steadily across the year.