Is this the last 5pc savings deal in Britain?
STOP SHORT CHANGING SAVERS
SAVERS who diligently put money aside each month have been hard hit as top regular savings rates disappear.
The latest blow came last week as M&SBank pulled its top 5pc rate for those using its Monthly Saver.
The cut came just weeks after HSBC and First Direct slashed the 5 pc rate on their regular savings accounts to just 2.75 pc.
Virgin Money also reduced its Regular Saver rate from 3pc to just 2pc at the start of this month for those opening a new account.
And Santander slashed its Regular E-Saver rate from 5pc to 3pc, and then again to 2.5 pc in June.
Regular savings accounts have been around for years, helping people get into a habit of putting something by.
You commit to paying in a set amount each month for a year, and in return you are rewarded with a higher rate than most easyaccess accounts.
But the gap between the best regular savings and easy-access rates has now narrowed significantly, leading experts to question if banks are trying to kill off this type of account.
Rachel Springall, finance expert at researchers Moneyfacts, describes the disappearance of the 5 pc deals as ‘devastating news’.
Myron Jobson, campaigner at investment platform Interactive Investor, says: ‘The demise of 5 pc fixed-term savings accounts is bad news for savers. They offered an enticing carrot to encourage people to get into a savings habit and build a nest egg amid a period of very low interest rates.’
Savings rates have fallen as providers look to keep the costs of raising money as low as possible so they can compete in the mortgage market, where rates are at record lows.
Now, the only 5 pc deal on offer is for some new Nationwide customers who open its FlexDirect current account and are able to pay in at least £1,000 a month.
Customers earn 5pc on the first £2,500 in their account. But after 12 months the rate drops to 1 pc.
Those already saving into the M&S Monthly Saver will continue to earn 5pc until their account comes to the end of the one-year term. New savers will now earn just 2.75pc — or £45 interest on the maximum £250 monthly saving, down from a previous £81.
But remember, you won’t earn the full 2.75 pc rate on all your savings. Rather you’ll see £6.90 interest on the first £250 you put in as it stays in your account for a whole year. But the next £250 will only be in the account for 11 months, so will earn 11/12ths of this — or £6.30. On your final £250, which will only be in the account for one month, your interest is only 57p. As a rough calculation, regular savers earn roughly half the advertised rate on their full savings. Saffron 12-Month Fixed Rate Regular Saver pays 3 pc. But it is only on offer through its limited branch network. Other accounts include Kent Reliance branch-based Regular Saver at 3pc and Yorkshire BS Monthly Regular Saver at 2.5 pc