UNTANGLE THE SAVINGS WEB
Nearly 2,000 accounts available Small print runs to 52 baffling pages Bank’s 32 versions of SAME account Rates slashed if you make withdrawal
MONEY Mail today lays bare the baffling state of savings as experts call for an overhaul of the market. We also launch our ‘Stop Shortchanging Savers’ manifesto — calling for an end to the scandal which has for too long seen loyal customers punished for saving.
Today we highlight just how absurdly confusing the market has become, and call for a clear and fair way to make savings pay.
1,873 ACCOUNTS ON OFFER AND WATCH FOR PITFALLS
LAST night there were exactly 1,873 different savings accounts open for business — often leaving ordinary savers clueless as to where they should keep their money.
Yet only a handful of these accounts pay interest at a rate that beats inflation, and those that do require you to lock away your cash for five years. This means money in almost all savings accounts is wasting away.
There are around 350 easy access accounts on offer from just over 100 providers. But savers need to watch out for a host of pitfalls that could cost them dearly.
Some accounts restrict the number of withdrawals, while others pay a decent rate but only for a limited time. Others will demand a huge deposit to open the account, while some automatically move your money to a lower rate after 12 months. Some providers bar you from opening a new account if you already have one with the bank.
52 PAGES OF TS & CS
HALIFAX’S savings account terms and conditions run over 52 pages and to more than 30,000 words. The High Street bank, which pays just 0.2 pc interest, recommends savers read the document before applying for an account.
Anna Bowes, a founder at advice site Savings Champion, says: ‘It is very confusing for savers who have to pore over pages of Ts & Cs. They might not earn the rate they were expecting or even worse they can find they cannot access their money when they need to.’
ONE PROVIDER, 28 ACCOUNTS
YORKSHIRE Building Society has 28 different savings accounts on offer to customers — from Isas to five- year- fixed deals. The accounts offer 17 different interest rates varying between 3.8 pc on its Child Regular Saver and 0.2 pc on its Access Saver Plus.
Other names on easy access accounts include Internet Saver Plus, Internet Saver, Access Saver, Cash Card Saver, Annual Access and 1 Year Limited Access Saver.
Nationwide lists 13 different rates varying from 0.1 pc to 3 pc on its 14 accounts currently on sale. Often you earn a different rate of interest depending on how much you have in the account.
ONLY ONE IN TEN BOTHER TO SWITCH
ONLY 9 pc of savers have switched their easy- access account to another provider in three years, research from the Financial Conduct Authority shows. And 45 pc stay with their accounts for more than five years. Old accounts typically pay lower rates than those opened more recently — even though they cost no more to run.
It means tens of thousands of savers are earning a pittance on cash languishing in more than 1,500 old savings accounts.
Citizens Advice has estimated that savers are missing out on £48 annually each on average for failing to shop around for a better deal.
TEASER RATES DROP OFF A CLIFF
SAVERS are at risk of falling for teaser rates from banks and building societies that offer an attractive rate that later drops off a cliff.
Providers routinely launch accounts for new customers and then withdraw the old ones from sale, and quietly cut the rate.
It means that if you haven’t checked your rate for a year or more you could well be earning a lousy rate of between 0.05 pc to 0.3 pc.
AA Savings Easy Access’s headline rate of 1.11 pc nosedives to 0.2 pc after a year. Some old Halifax accounts, such as Liquid Gold, pay just 0.05 pc.
The initial 1.15 pc with Post Office Online Saver drops to 0.25 pc. The current Post Office Online Saver is Issue number 40 of the account, launched at the start of this month. Savers in issues numbers 1 to 28, on sale previously, are earning just 0.25 pc, and not the 1.15 pc advertised on the current version.
Another trick is to move you into another account after a year. Halifax moves anyone who has been in its Everyday Saver for a year into its Instant Access Saver. This is a closed account no longer on sale and pays 0.2 pc. Lloyds Bank Easy Saver does much the same.
ARE WE HEADING TO ZERO % RATES?
WITH the uncertainty surrounding Britain’s Brexit future, some experts fear the UK might be heading for recession.
This could cause the Bank of England to cut its base rate later this year — even by as much as 0.5 percentage points.
Andrew Hagger, of financial website MoneyComms, says: ‘There are easy access savings accounts already paying just 0.10 pc so if the Bank of England decides to cut rates by 0.25 pc there’s the possibility that some accounts may be cut to 0 pc.’ It is not uncommon for customers to suffer 0pc interest on cash in current accounts.
Retired estate agent Peter Gladwell, 70, is moving £2,500 from his Nationwide account now the building society has cut its 3 pc interest perk to 0 pc. Peter and his wife Elizabeth signed up to the Nation
wide FlexPlus current account two years ago. It had a monthly fee of £13 but the couple from Worthing, West Sussex, were drawn in by its interest rate of 3 pc on balances up to £2,500. Last month the building society wrote to say it would be stopping all interest.
Peter says: ‘It’s just what I’ve come to expect from banks, a total lack of respect for their customers. Savers like me feel forgotten by the banks.’
ONE ACCOUNT, 32 VERSIONS
VIRGIN Money promises to pay 1.16 pc on the 32nd issue of its Virgin Easy Access Saver.
But those in issues one to 30 have seen their rate cut to just 0.25 pc. Issue 31 pays 1.01 pc.
The Britannia Select Saver 10 account on sale now has a rate of 1.4 pc. But those in previous issues earn less. If you have Issue 8 you will be earning just 0.6 pc, while issues 1 to 6 pay 0.7 pc.
And once you are in a closed account, you are also unlikely to see the full benefit of any base rate rise from the Bank of England.
Loyal savers stuck in one of 17 Nationwide’s closed easy access accounts earn 0.1 pc on balances up to £10,000 and only 0.25 pc if they hold £ 50,000 or more in the account.
PUNISHED FOR WITHDRAWALS
AMONG the top 30 easy-access accounts on offer, where rates range between 1.45 pc and 1.16 pc, no fewer than 13 come with withdrawal restrictions.
These restrictions mean you can find you have no access to your cash if you have taken money out just twice in a year — even if you want to close the account.
Others let you go over the limit but cut your rate to the bone when you do. Virgin Money Double Take E-Saver at 1.43 pc and the Yorkshire BS One Year Limited Access Saver at 1.4 pc pay the highest rates but have the most severe restrictions. With Yorkshire BS you can make withdrawals on only one day a year — but on that day you can make as many as you want.
There are more complications. The rate only lasts for 12 months after which you are shifted into another account where your rate falls to 1.1 pc. And you can’t open the account if you already have a savings account with the society.
With Virgin Money you can make two withdrawals a year. Once you have made them, you can’t touch your money or close your account.
Rachel Springall, finance expert at MoneyFacts, says: ‘The industry needs to redefine easy- access accounts, so they do what they say on the tin. People open them and make withdrawals without realising the penalties they face.’
SKY-HIGH MINIMUM BALANCES
SKIPTON BS new Limited Access Saver demands that you have at least £25,000 in your account at all times. It lets you make one withdrawal a year, but you must leave the minimum in your account.
Skipton asks for a huge £50,000 to earn the top rate of 1.3 pc on its e-Isa Saver. Investec asks for a minimum £10,000 to open its easy access account which pays 1.4 pc.