Sav­ings rates im­prove, but don’t look to the big banks

The Daily Telegraph - Your Money - - YOUR MONEY -

Rate rises on sav­ings ac­counts have out­num­bered cuts for the first time in more than a year. How­ever, it is the banks that many have not heard of that are of­fer­ing the best deals. In Jan­uary there were 67 in­ter­est rate rises and 53 cuts, ac­cord­ing to Money­facts, the data firm. The last time rises out­weighed cuts was in Septem­ber 2015, when there were 113 rate in­creases to 29 cuts.

The rates on five-year bonds are also in­creas­ing. In De­cem­ber the top 10 deals paid an av­er­age of 1.96pc. Now the fig­ure has reached 2.01pc.

The change is min­i­mal – it is the dif­fer­ence be­tween earn­ing £294 and £301.50 on sav­ings of £15,000 – but it is a step in the right di­rec­tion. The rises come at a time when in­fla­tion is in­creas­ing, stand­ing at 1.6pc in De­cem­ber, mean­ing that costs are ris­ing for con­sumers.

How­ever, savers look­ing for the best in­ter­est rates will not find them of­fered by es­tab­lished providers such as Lloyds, RBS and NatWest.

Not a sin­gle high street bank ap­pears in the cur­rent top 10 rates paid on five-year bonds. The only fa­mil­iar name is Tesco Bank, which pro­vides on­line-only ac­counts. The rest of the top-pay­ing providers are ei­ther new or less es­tab­lished.

The Bank of Lon­don & the Mid­dle East cur­rently of­fers 2.1pc, but it is an Is­lamic bank, mean­ing it does not pay in­ter­est – in­stead it gives a tar­get profit rate that is not guar­an­teed.

How­ever, it of­fers cus­tomers the op­tion of with­draw­ing their cash penalty-free if the rate is not met.

Atom Bank, a new, mo­bile-only provider that pays the sec­ond high­est rate of 2.05pc, be­gan to of­fer sav­ings ac­counts to all cus­tomers only in Oc­to­ber last year (it pre­vi­ously had an in­vi­ta­tion-only list). It also of­fers the high­est-pay­ing one, two and three-year bonds, which pay 1.5pc, 1.65pc and 1.75pc, re­spec­tively.

Ikano Bank, a Swedish provider owned by the founders of Ikea, en­tered the sav­ings mar­ket in De­cem­ber 2015 and is of­ten found in the best-buy ta­bles. It pays 2.05pc on its five-year bond, while its three-year bond matches Atom Bank’s 1.75pc.

There are also no signs of high street Bank of Lon­don & theMid­dle East Atom Bank Ikano Bank Van­quis Bank Char­ter Sav­ings Bank Skip­ton Bldg Soc Al­der­more Mile­stone Sav­ings Masthaven Bank OakNorth Bank providers among the high­est-pay­ing easy-ac­cess ac­counts.

Re­nault-owned RCI Bank, which launched in June 2015, of­fers the top rate of 1.1pc. How­ever, it is not pro­tected by the Fi­nan­cial Ser­vices Com­pen­sa­tion Scheme. In­stead it sub­scribes to the French equiv­a­lent, which pro­tects €100,000. If the bank goes bust, cus­tomers could face ex­change rate is­sues.

By com­par­i­son, RBS’s in­stant saver of­fers just 0.01pc on bal­ances up to £49,999. In a year, £15,000 of sav­ings would earn just £1.50.

High street banks con­tinue to pun­ish savers with re­duc­ing rates.

Last week Na­tion­wide cut the rates on its sav­ings range by up to 0.25 per­cent­age points. The rate on the In­her­i­tance Isa, is­sue 6, was re­duced from 0.75pc to 0.5pc, and the rate on its Flex­clu­sive Isa was cut from 0.95pc to 0.75pc.

San­tander and TSB made cuts this week. San­tander’s lat­est ver­sion of its Reg­u­lar E-Saver pays 2.5pc, down from 3pc. TSB re­duced the rate on its Easy Saver, eSav­ings and two-year fixed-rate Isa by up to 0.2 per­cent­age points.

The top rates are from un­known banks, but they are ris­ing, writes Amelia Mur­ray

This week the FSCS limit rose from £75,000 to £85,000 of sav­ings per in­sti­tu­tion. If a provider goes bust, the FSCS will re­im­burse cus­tomers up to this amount.

Shop­pers are ex­pected to be hit by a rise in in­fla­tion, see­ing su­per­mar­ket prices go up

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