Current account misery

BANKS have cut interest rates paid on current accounts by up to two-thirds.

These accounts have been a lifeline for many savers trying to squeeze each penny of interest from their nest eggs against a background of very low rates. But the best deals are vanishing.

TSB and Tesco Bank have already slashed rates, and Lloyds Bank will do so in October.

TSB cut the rate it pays on the first £1,500 in its Classic Plus current account from 5 pc to 3 pc this month — a 40pc reduction. Those who keep the full £1,500 in their account now earn £45 interest a year, down from £75.

The rate cut came just two weeks after Tesco Bank slashed its current account rate by twothirds from 3pc to 1pc. If you save £3,000, you earn just £30 in annual interest, down from £90.

From October l, Lloyds is reducing its Club Lloyds current-account rate. At present it pays 1.5pc on the first £5,000 in the account. From October it will pay just 1pc on amounts up to £4,000 and 2pc on between £4,000 and £5,000. A £3,000 balance means your interest will drop by a third, from £45 to £30. At £5,000 you’ll see a 20 pc fall from £75 to £60.

Bank of Scotland, part of Lloyds group, will make the same rate cut to its Vantage account.

Nationwide still pays 5pc on the first £2,500 in its Flex Direct account, or £125 interest. But you only earn it for the first year after which the rate drops to 1 pc, or £25 on £2,500. Santander’s 123 account pays 1.5 pc on balances up to £20,000. On the full £20,000 you will earn £300 in interest — but there is a £5 monthly fee (£60 a year).

A Lloyds Bank group spokesman says: ‘Our Club Lloyds account and Bank of Scotland Vantage add-on continue to recognise customer loyalty through the associated benefits.’ TSB says: ‘We constantly review market conditions when we make any interest rate changes.’