Savers give up on switching for best deals
SAVERS are giving up on putting money aside and now rarely bother to move their nest eggs each year for a better rate.
City watchdog the Financial Conduct Authority (FCA) has discovered just one in ten savers have switched their cash Isas in the past three years.
As many as four in ten cash Isa savers, and 45 pc of those in taxable accounts, have stayed in the same account for five years or more, according to the FCA.
Official figures from the Office for National Statistics show the amount we save plummeted to 0.9 pc of our income last year, down from 2.9 pc in the previous 12 months, and its lowest level for nine years.
The FCA has turned its attention to how banks and building societies treat loyal savers after finding so few people move accounts regularly.
It fears long-standing customers are still poorly treated — even though it brought in sweeping changes just a year-and-a-half ago in the way firms communicate with their customers.
The FCA is concerned providers hold a significant amount of customers’ money in accounts opened more than five years ago. These tend to pay less interest than newly opened ones. More than half of savers are put off switching because they feel loyal to their bank and think there is not much difference between providers. Nearly a fifth have not even thought about it.
Yet on easy-access accounts you can earn a top 1.3 pc with RCI Bank’s Freedom Account, compared with a miserly 0.05 pc on HSBC’s Flexible Saver.
Anna Bowes, director at Savings Champion, says: ‘ There is a perception switching is not worth the effort because rates are so low.
‘ But newer accounts can pay much more than older ones.
‘One barrier for switching taxable accounts is that providers ask for different information from savers opening an account. The process needs to be made slicker.’
Banks paying loyal savers less include Virgin Money. It pays 1.01 pc on its current issue of Easy Access Cash E-Isa, but only 0.5 pc on some previous issues.
Tesco Bank Internet Saver pays 1.18 pc to new customers and 0.55 pc to those who have been with it for a year. With Post Office, those new to its Online Saver earn 1.05 pc, while some existing savers get a paltry 0.25 pc. Loyal customers at NatWest will see their cash Isa rate fall from 1.25 pc to 0.25 pc on balances of £ 20,000 when the bonus disappears on May 18. Halifax, Lloyds and Santander move you to a lower- paying account once you have been with them for a year. The gap between the rates here is not big but could get wider once the base rate starts to climb. Banks have a record of raising rates on new accounts more than older ones. Halifax pays a poor 0.35 pc to savers taking out its Isa Saver Variable now, but an even worse 0.2 pc after a year when it shifts you into its Instant Isa Saver, which is not on general sale. Lloyds shifts you from its Easy Saver to its Standard Saver after a year, where you earn 0.2 pc. With Santander, the move from its eISA to its Isa Saver after 12 months sees a drop to 0.2 pc.