Good news for savers with large deposits - the Government ups the guarantee from £50,000 to £85,000 (but always check to see if your bank/building society is covered by the one banking licence if you use more than one financial institution).

This is how I think the savings market will shape up:

• Regardless of what you hear or are told by either the political class or those with an agenda, the UK economy is still in a dreadful mess due to the massive debt overhang + decades of fiscal mismanagement
  
  
• For this reason base rates, currently 0.5%, aren't going to rise in 2012 and possibly even 2013 (some economists even go as long as 2016)
  
  
• That's the bad news for savers and those trying to generate an income from cash holdings
  
  
• However, the good news is the banks and other financial institutions (most who are technically insolvent) are desperate for cold, hard cash so expect 3.00% to be a minimum for instant access accounts and 3.25% (minimum) for one-year fixed rate deals
  
  
• Inflation with a bit of luck will hold steady to decline a touch (in January 2012 it's at 4.8%)
  
  
• Important: I don't trust banks right now, as I said above most are technically insolvent so it's prudent not to hold more than £85,000 in cash in any one institution (the government guarantees all deposits up to £85,000)
  
  
• If you have a large amount of cash (in excess of £85,000) make sure you spread it around. If using a building society and bank make sure the bank is not the owner/parent of the building society (I hope that makes sense! Email me if you need a better explanation - Alex Green)

Summary

2012 is likely to be exactly the same as 2011. Base rates hold steady and little change in the savings market.