I permanently lost 31 LNP postings today!

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Interest rates hit all-time low

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.`

Age Concern said older savers were being penalised for their prudence.

`Many older people who rely on the interest from modest savings to top up their income will be anxiously counting the cost of recent cuts, particularly as so many are already struggling to pay high household bills,` said Age Concern Director General Gordon Lishman.

`There are many good reasons for cutting interest rates and helping borrowers is extremely important,` said Taxpayers` Alliance Campaign Director Mark Wallace.

`But it would be morally negligent and economically foolish to neglect the impact it has on savers. There have to be tax cuts on savings income,` Wallace said

The government called on banks to remember savers when passing on the rate decision.

`Clearly we want to see people and businesses getting the benefit from the rate cuts, but banks and building societies also need to think about the interests of savers too,` said a Treasury spokesman.

(Editing by Keith Weir)