Hold your bank to account
BIG banks have abandoned savers by continuing to offer rock-bottom rates on their savings accounts, giving their loyal customers a rotten deal.
This is making it even harder for savers to get a decent return as base rates remain stuck at 0.50 per cent.
Banks are falling behind as building societies work harder to offer customers more interest, while the new breed of challenger banks is also battling for business.
Savers are being urged to look beyond the high street to get a better return.
BANK BLOW Almost three quarters of building societies pay more than base rate, compared to just over half of all accounts held with banks. The gap has widened over the last five years as banks have cut rates at a faster pace, according to online savings account comparison service SavingsChampion.co.uk.
It found that building societies now pay their customers 0.92 per cent on average, while bank rates average just 0.69 per cent.
Tom Adams, head of research at SavingsChampion, said too many banks offer “paltry rates”, both to new and loyal customers. “Building societies pay higher rates on average, drop rates by less and are treating savers more fairly,” he said.
The big high-street banks pay some of the worst rates. “These figures should be a wake-up call to customers to move their funds as soon as possible,” Adams added.
Challenger banks are also injecting some competition and often dominate the best-buy tables (see page 38).
Adams urged savers to keep an eye on market-leading rates and grab them while they can: “Do not accept paltry interest rates. If your provider does not reward your loyalty, show it a clean pair of heels.”
EASY, EASY Challenger bank BM Savings currently offers the best easy access savings rate on the market at 1.35 per cent, an online-only account with a minimum deposit of £1.
National Counties Building Society also pays 1.35 per cent with instant access and branch access too, according to figures from MoneyFacts.co.uk. However, you have to pay in at least £5,000.
Paragon pays 1.31 per cent on a minimum of £1 online, while challengers Virgin Money, the Renault-owned RCI Bank, Shawbrook and Sainsbury’s Bank pay 1.30 per cent.
These are all online accounts although Sainsbury’s does offer phone access as well. Coventry Building Society pays 1.25 per cent and Ford Money 1.22 per cent.
By comparison, Royal Bank of Scotland pays just 0.20 per cent and then only if you deposit £25,000, while NatWest pays 0.10 per cent on £1. MEET THE CHALLENGE Challenger banks also dominate the fixed-rate savings bonds tables, with app-based account Atom paying 2.05 per cent over one year, closely followed by Investec, OakNorth and Masthaven.
Secure Trust Bank, Gatehouse Bank, Hampshire Trust Bank and Charter Savings Bank are some of the unfamiliar names jostling to offer savers the best deal.
David Black, banking specialist at DJB Research, said many savers may be nervous about trusting their money to the new breed, but you get exactly the same protection: “Most are covered by the Financial Services Compensation Scheme (FSCS), which protects deposits up to £85,000 in the unlikely event of the bank going bust.”
A handful are covered by foreign depositor protection schemes, so you would have to seek compensation overseas.
Another problem is that the best rates are mostly found online, without branch access. “You have to keep up with the latest technology,” Black said.
Savers may get some respite next month with markets predicting a 77 per cent chance that the Bank of England will hike interest rates to 0.75 per cent.
However, many will be sceptical as governor Mark Carney has raised false hopes before.