/ Money

Has your bank lured you into the savings trap?

Workmen walking with giant pound coins

When was the last time you checked your savings rate? If it wasn’t recently, you might be in for a nasty shock. British savers are missing out on over £12bn in lost interest every year. It’s time to reclaim your share.

Astonishingly, almost half of all UK savings accounts now pay interest of 0.5% or less. And if you think that sounds bad, one in four accounts pay no more than 0.1%. That’s a measly £1 a year for every £1,000 you’ve got tucked away.

Although there’s nothing to stop most people switching out of these awful accounts, the truth is that most banks do everything they can to keep their customers in the dark about the poor rates of interest they’re earning.

Most savings statements do not even include the most basic of information – such as what interest rate you’re earning. And many banks don’t bother to let you know about the better rates that are available through their other accounts.

The great British savings scandal

Over the last few decades, the banks have built the whole savings industry around the idea of tempting you in on high headline rates, and then slowly but quietly cutting them back and hoping you don’t notice.

While the best instant access savings accounts are currently paying close to 3%, the rates on these accounts will all plummet to around 0.5% within 12 months of the account being opened. Thereafter, interest rates will likely be whittled down even further still.

At the same time, the very same banks will be launching new accounts to attract a new crop of unsuspecting customers into their savings trap.

How to get a better savings rate

Which? has been putting pressure on the banks to start being more upfront with their customers, and there’s hope that over the next few years, we will at least begin to see interest rates printed on statements.

In the meantime don’t let yourself be caught in the trap. British savers are collectively losing out on £12bn of interest every year by letting their money languish in poor paying accounts.

 

 

Use our new Saving rates booster tool to find out how much interest you’re losing out on, and then take five minutes to switch your money to a better account.

You could earn yourself hundreds of pounds worth of extra interest with next to no effort whatsoever. And you’ll also have the satisfaction of knowing that your savings are working for you, and not for your bank.

Comments
Guest
Jay g says:
31 October 2010

The points made about interest rates are absolutely right but the reality of the impact on most people is 50% of not much. With interest rates so low an increase of 1% on your rates if you can achieve it will only yield £10 a year per thousand so unless you have a six figure sum to invest (some chance for most of us) you probably won’t notice a significant change in your lifestyle compared to the hassle of the ludicrous bureacracy often involved in setting up a new account. The money laundering rules now seem to affect anyone but criminals and terrorists financial transactions.

Much more invidious and scandalous is the incestuous relationship between Government and moneylenders or so called investment fund managers. A good example of this is the fact that pretty well all of the investment fund managers/banks are legally able to insist you investing pension funds with them through a so called financial advisor, thus ensuring yet another ‘prophet’ gets a slice of your money in commission for doing not much……

Guest

When discussing possible alternative accounts recently with our local Alliance & Leicester (Santander) advisor, I was told that, if you took out a certain investment a/c, your money was totally inaccessible for the duration of the term (in this case 2 yrs). In other words, the bank took your money and, whatever your subsequent personal financial circumstances during the term, you could not access any part of your own money, at any time, throughout the term. With most accounts you pay a penalty (e.g. loose interest etc). I questioned whether this was legal – and whether banks were permitted to deny a customer’s access to their own money as this as seemed very close to theft – however much it was dressed up in financial jargon. The adviser couldn’t answer, so he rang ‘head office’. They couldn’t seem to give a coherent answer to the question either!

Guest
Charlotte says:
4 November 2010

Just used the savings booster tool to find that my postal ISA with Santander is earning 0.1%. I also have not had a statement from them since 2008…. I am shocked and disgusted but not at all surprised. We banked with the Abbey for years but left because they were so so so unbelievably rubbish and unprofessional. I am now looking for somewhere new to put my languishing cash.

Guest

I have recently opened an E savings account with Natwest it has a fixed rate for 12 months , so after 12 if it wont match the rates that are around then I will ditch it. It is important to make a note of when it expires because Natwest wont tell me. I find it a hassle to keep changing but with rates dropping after a set priod it is the only sensible thing to do. Banks are the only institutions that get rewarded for failure, any other business would just go to the wall, and after a lot of hot air from politicians it doesn’t seem to me that things are likely to change for the better for savers.

Guest

When interest rates were 4-5% or more, the inclusive 12 month bonus was usually a small proportion of the total, perhaps 1%. Now I notice the interest rates that banks are offering are made up almost entirely of the 12 month ‘bonus’. For example Santander’s Esaver Issue 2 offers an interest rate of 2.75%, but 2.25% of that is the 12 month ‘bonus’.

Guest
Susan says:
22 March 2013

I have discovered a Halifax ISA I have had for ten years is now paying 1% and has been for 4 years. I stopped receiving statements presumably because the account was deemed ‘inactive’. I have been on the phone trying to resolve but my phone ~( which is rubbish ran out of juice after half an hour) The last thing I asked was why an inactive account was deemed to not deserve interest. What a farce. Obviously not moved on since this was written.
Might as well have reduced mortgage by that amount over that time.

Guest
KarenA says:
21 December 2013

Last year I phoned Lloyds TSB to review my ISA Account rate as it had come to an end – they were very helpful and even increased the rates on my other savings accounts. Fantastic! This year, I phoned Lloyds and asked them to review my interest rates. Complex, load of spiel – fast, incomprehensible and a complete waste of my time. In the end I told them to forget it – won’t be going through that again in a hurry. 12 month review? No thanks. What happened to variable rates on accounts – now it’s “we’ll give you little percent for a year followed by no percent so you have to ring us up and give us all your personal details”. Totally hacked off with my bank once again. Who are the idiots who make these decisions? Feel sorry for the staff who have to deal with the backlash.