Today Money Mail names and shames the 100 worst savings accounts from banks and building societies.
They all pay a pittance – at best just 1.51pc – despite the Bank of England base rate standing at 3.75pc. The list makes grim reading, revealing how banks and building societies are lining their own pockets by ripping off savers with derisory interest rates.
If your account is on the list, then I advise you shift your money elsewhere.
A handful pay less than 1pc, as banks have taken an axe to rates following four cuts in base rate last year.
And some of these rates will sink even lower in the coming weeks.
While the big banks and building societies have been quick off the mark to slash rates following the Bank of England’s most recent base rate cut from 4pc to 3.75pc last month, some smaller providers have yet to do so.
I have scrutinised 2,000-plus accounts – those currently on sale and old accounts – with the help of data scrutineer Moneyfacts to expose the worst.
Ninety-six accounts on our damning list pay less than 1.5pc a year, with the very worst paying a shameful 0.16pc.
Leaving cash in an easy-access account with a large and trusted provider often means you are missing out on far better rates elsewhere (picture posed by models)
This abysmal rate comes from Ikano Bank, with Cynergy Bank not much better at 0.5pc on some old issues of its Online Easy Access Account.
These providers may be small fry, but joining the worst five are three accounts from the mammoth Lloyds Banking Group – Bank of Scotland Access Saver, Halifax Everyday Saver and Lloyds Bank Easy Saver. They all pay just 0.75pc on balances up to £24,999, after slashing rates last week.
Shockingly, more than half of these 100 duds are run by the largest savings providers – Barclays (which now includes the Tesco brand), NatWest (along with RBS and Ulster Bank), Lloyds Banking Group (Lloyds, Halifax, Bank of Scotland and Scottish Widows), Santander (including Cahoot), TSB (soon to become part of Santander), Nationwide (which now includes Virgin Money) and Co-op Bank (now owned by Coventry BS).
Easy-access accounts are where most people hold the majority of their money and the big banks have the bulk of it – more than £800 billion out of the total £923 billion.
Leaving cash in an easy-access account with a large and trusted provider often means you are missing out on far better rates elsewhere.
Your bank and building society will always let you know if it cuts your rate. But they know that millions of savers fail to move their money even though the rates are abysmal.
Lloyds Banking Group runs no fewer than 14 of these dreadful accounts, Nationwide 12 (including Virgin Money) and NatWest a total of eight. Santander has three poor-paying accounts and will take over the five from TSB in the next few weeks, while Coventry has inherited nine with the Co-op and its brand Smile. Barclays has two of the worst-paying accounts and HSBC four – including First Direct and Marks & Spencer Money.
Even much-loved, government-backed National Savings & Investments (NS&I) is on the list.
Shockingly, the NS&I’s old postal Investment Account pays just 1pc to its 1.4 million account holders.
You could find that your own bank offers better rates in an account which suits you.
For example, NS&I has its Direct Saver paying 3.3pc. I expect this rate to edge down following the latest cut in the base rate, but even at 3pc you are still tripling your interest.
Cynergy Bank’s current issue of its Online Easy Access Account (number 93) pays a much higher 3.7pc, which includes a 2 percentage-point bonus for a year. You need to move it again when the bonus runs out.
At least your rate then just about matches the current 3.2pc inflation rate (in the 12 months to November) so your savings are not losing purchasing power as prices rise.
But you will do better if you move it to another provider. The best rates here are from providers such as Spring, Kent Reliance, Charter Savings Bank, Ford Money, Chetwood Bank, GB Bank and Hampshire Trust Bank, which all pay 4pc or more. These rates could edge down following the base-rate cut, but you will still more than double your interest if your money is currently sitting in an account paying less than 1.5pc.
And while you are at it, look to move money you hold in your current account. In total there is £300 billion sitting around earning nothing in these accounts.
Research from Spring (owned by Paragon Bank) shows we missed out on billions of pounds in interest last year by keeping big chunks of our money here. It says there were nearly 6.5 million current accounts paying zero interest with over £10,000 in them last year. Move your money to an account paying 4pc and enjoy a not-to-be-sniffed-at £400 in interest.
Also check your cash Isa rate – big banks that pay dreadful rates on their easy-access accounts also pay a pittance on their cash Isas. But when it comes to cash Isas don’t move the money yourself, as you would with an ordinary savings account. If you do, you could lose the tax-free status on the interest. Instead pick a new provider and then ask them to move it for you by filling in their transfer form.
Some 60 of these awful-paying accounts are closed to new savers, meaning they are escaping the notice of savers and regulators. It underlies the importance of checking your rate very regularly, as providers come out with new accounts that have slight variations in the terms and conditions but pay better rates. They hope you won’t notice that you are not in their best account, so pay you less interest than newer savers and they make money out of you.
Rachel Springall, finance expert at Moneyfacts, agrees: ‘Loyalty does not pay, so ditch any account which pays a paltry rate.’
The big banks were quick to pass on the latest base-rate cuts to savers. Within days of the cut they were announcing new lower rates, which appear in the table. With some, you won’t be earning this lower rate for a few weeks as providers must give you warning of a rate cut.
But others in the table are likely to offer even worse rates in the next few weeks.
For example, Halifax has announced new lower rates on its Everyday Saver, currently on sale, passing on the full 0.25-point December base-rate cut even though its rates were already at rock-bottom. The rate on balances of up to £24,999 dropped from a pitiful 1pc to an even worse 0.75pc. On balances above this, the rate fell from 1.05pc to 0.9pc, and for those with £100,000 or more it now pays the princely rate of 1pc, down from a previous 1.1pc.
But on its closed Instant Saver account, which works in the same way, the rates are still at the old 1pc, 1.05pc and 1.1pc.
I expect them to be trimmed down to the same rates as its Everyday Saver shortly. Lloyds has done the same on its old and new accounts, so expect a further drop on the accounts that are no longer on sale.
HSBC Flexible Saver drops from 1.15pc to 1.05pc, and Barclays Everyday Saver goes from 1.06pc to just 1pc in March. NatWest Flexible Saver has fallen from 1.06pc to 1pc on holdings between £1 and £24,999. Santander has yet to announce if its Instant Saver and Everyday Saver (both no longer on sale) will fall further from their lowly 1pc. You end up in its Everyday Saver once you have been in its still-on-sale Easy Access Saver (currently paying 2pc) for a year.
Even if your account is not on the list, you could still be paid an atrocious rate. If you have an account which limits the number of withdrawals you make and overshoot this, your rate can drop sharply. Nationwide 1 Year Triple Access Saver pays 3.3pc and allows three withdrawals a year. If you make more than three, your rate falls to just 1.05pc for the rest of the year.
