Earn £100 interest by switching easy access accounts

Sylvia Morris

LOYAL savers should ditch their easy-access account for a rival one paying more than £100 extra interest a year, Money Mail research has found.

The gap between the rates of interest paid by banks on their old easy-access accounts and that on new deals has risen by such a degree that customers are missing out on huge interest boosts.

In the worst cases, banks are bringing out high rates on new offers while, at the same time, meting out harsh cuts to savers in their older accounts.

Last week, customers who have been l oyal to BM Savings’s I nternet Extra easy- access account — part of Halifax — saw their rate cut to 0.2 pc after tax (0.25 pc before).

However, its new easy-access account customers are being offered a much more generous 1.28 pc (1.6 pc).

A simple switch would gain you £ 108 after tax on every £10,000 savings.

The sums to be earned by switching accounts are also worthwhile if customers shop around outside their bank.

By switching from an old account that pays a lousy 0.04 pc (0.05 pc) to a newer branch account at 1 pc (1.25 pc), you’ll earn £100 on each £10,000 after tax, up from just £4 — an extra £96 a year.

For example, savers i n the HSBC Flexible Saver account earn as little as 0.04 pc (0.05 pc). This means they earn a risible £4 after tax.

A switch to a branch account paying more than 1 pc (1.25 pc) — found at Virgin Money, Leeds, West Bromwich and National Counties building societies — could earn at least £96 more.

Sue Hannums, of savings advice website Savings Champion, says: ‘The gap between the rates on old and new is widening alarmingly. It’s become horribly clear that staying loyal to your provider can cost you dearly.’

Money has poured into easyaccess accounts in the past three years as savers turn their backs on poor-paying fixed-rate bonds. Savers hold £577 billion in these accounts — up £129 billion on three years ago.

Over this same period, there have been a huge 3,500 cuts meted out to savers, an average 1,166 a year. But the rate of cuts has quickened this year, with an average 1,100 cuts in seven months.

In July alone, the number hit 215 and, at 113 in the first two weeks, August looks as though it will trump this. More cuts are on the cards for next month, including Barclays and Virgin Money.

Among t he worst- paying accounts are those from big banks, including Barclays, Santander, Lloyds, NatWest, Halifax, HSBC and Royal Bank of Scotland.

A recent study from city regulator the Financial Conduct Authority found fewer than one in five savers switched their easy-access accounts in the past three years.

Half of all account holders don’t even know what interest rate they earn. Experts point out savers should consider making the switch as soon as possible because they will get an even bigger boost thanks to new rules next year.

From April 6, 2016, the personal savings allowance means you won’t pay any tax on your first £1,000 of savings interest as a basic-rate taxpayer. For higherrate payers, it’s £500.

The higher the rate, the greater the boost in pounds and pence you will see.

Your first step to a better rate is to find out if your bank is offering existing savers a better deal. If not, switch providers (see table above for best deals). When you do this, the bank or building society has to check you are who you say you are under money laundering rules. They can do so by checking the electoral register and the details that credit reference agencies hold on you. With branch- based accounts, you often have to show documents when you open an account. That means taking a passport, driving licence or letter from the Department for Work and Pensions to prove who you are. For proof of where you live, you need a council tax or utility bill that is no more than three months old.

Sylvia Morris’s savings tables are updated daily