/ 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.

peter hunter says:
26 October 2010

banks show a high interest rate, then make a second issue showing a high rate whilst reducing the rate on the first issue. People, who are busy see the headlines and don’t realise the first issue has had it’s interest rate reduced. Why should the banks make a second or third issue on an investment other than to reduce the rate of previous issues. This is the banks taking advantage of investors and should be stopped.

Ruud says:
26 October 2010

We have two ISAs with Santander. We have had these for eight years and during the last six years we have not done anything with these. Last year we got a last statement showing 3.6% interest. Last week I realised that this year we had not received a statement. When I rang them I found out that they had declared the accounts dormant as there had not been a transaction for six months! As the accounts were dormant, statements are no longer issued. Coincidentally the interest rate had now dropped to 0.1%. The higher interest rate we had had or eight years was suddenly a called bonus rate! Clearly the accounts were declared dormant so that Santander was not required to inform us of the dropped interest rate, either through a statement or notification.

Hi Ruud, it sounds like our savings tool could help you – it will show you some alternative accounts with better interest rates. Here’s the link – hope it helps:


Hello Ruud, I think Santander are certainly taking liberties to make an account dormant because it had been inactive for just 6 months. An ISA is regarded by some people as a long term investment (if you can call 0.1% an investment), but what concerns me even more is that the Chancellor suggested that banks should hand dormant accounts over to the Treasury. The banks and the government seem to be intent on stealing our money one way or the other!

Just checked mine (ING). 0.4% net, which isn’t great. Not worth moving it at the moment as all the money sat in there is for the wedding (1 month! eek!), so could end up in a muddle. Definitely on the list of things to do in the new year. Save and find an account with decent interest.

My Nationwide cash ISA rate has been dropping like a stone for the last few years to 0.25% currently,and it was only because this silver surfer was becoming a little au fait with computing since I retired that I found they were doing a e-ISA for 2.75% as well.So it does pay to shop around,even within the same company.No-one from Nationwide advised me about this other account as an option,and I didn’t ask.So,yet again,we see the same adage of don’t ask – won’t tell.I does pay for the user to take a little more interest in their interest,and would it really hurt some companies to highlight these options a bit more proactively?

Trouble is – my e-ISA with Nationwide dropped from its ‘bait’ rate to measly one much less. I was suckered in too.

I’m in the same boat – My First Direct ISA now pays 0.5 % – It’s not dormant – but I haven’t paid anything into it since the credit crunch and interest rate dropped. The only “high interest” First Direct saving plan is a 3.5% three year bond which I don;t want – as – at my age I want to be able to freely access it without penalty.

Hi James – After a little rearrangement – I now have a much higher interest rate on an ISA account with First Direct (I really like the Bank) on a yearly term. In addition they have an excellent Regular Savings Account.

It is a pity it hadn’t been made clearer.

It is now rather more fiddly but at least the income increases.

Roger B says:
26 October 2010

Why do I have to waste my time – and the bank’s time – opening accounts and closing them twelve months later? If everybody did that then surely the banks would stop this ridiculous merry-go-round.

pickle says:
26 October 2010

They are all out to catch us – sign on – then – WHAM – down goes the savings rate. For my part I prefer to invest in shares, picking those with good dividends of around 6%. They can be cashed relatively easily.

Stephen James says:
26 October 2010

All the advice about “vote with your feet” and “switch online” to get a better rate is fine in theory, but don’t forget the hassle when trying to open an account with a new provider. I have consistently found it a somewhat long and protracted process, particularly when ID is required. In one instance I had to get a solicitor verified copy of my passport, in another it necessitated a 40 mile journey to the nearest branch of the building society as they needed to see me personally. Even providers who boast their accounts can be opened on line, often subsequently ask for substantial ID documents before the accounts can be formally set up. In another instance, the process took so long that by the time the account was opened, the provider had withdrawn the account from sale!

I fully support the Which campagn on greater visibility of interest rates for savings accounts. When a years bonus is quoted it would be helpful to make it clear whether the year is taken from the date the bank/building society announces the product or the date at which individuals open their individual account.
With online accounts it would be very helpful if the current interest rate is included with the current balance information as well as with paper balances sent to holders. Without this infromation it is impossible to know when to move an account to another provider.

I agree with the comments already made – especially with Roger B and the Which? campaign. It makes my blood boil to have to keep tabs when each account has matured and then to go to the whole process of closing and opening new accounts. The costs involved in wasted time (for all concerned) together with this stupid bureaucracy must be astronomic – except, of course, for the banks who rely on lapsed accounts to make their profits. Banks are not interested in keeping and rewarding customers and I am never backward in telling them so face-to-face. But this cuts little ice. Shameful.

With your support some of the banks have already responded to our great British savings scandal campaign, including Santander and the Royal Bank of Scotland http://www.which.co.uk/news/2010/10/12bn-savings-scandal-banks-reaction-234089/

But this is only the beginning! Keep the comments coming and remember to use our Saving rates booster tool.

denmans says:
1 June 2011

I don’t think Santader have got the message at all.
I’ve just found out that my Santander account was earning 0.1%. I also found out that Santander had no plans to inform the other holders of similar accounts to mine. So, if Santander say they are responding, to the campaign please don’t believe them and be careful about blogging that they are.

Thanks Denmans, as is said in the link posted, Santander only partly responded to our campaign, claiming that they’d alert their customers to all of the interest rates this year. Have you had a rates brochure from them?

But you’re right, as of last year Santander had the highest number of low-interest accounts.

Hari says:
27 October 2010

This story insired our cartoon today in The Guardian. Do take a look!

Thank you, Which?

Good work again Hari – very amusing. More please =)

Join our live savings surgery right now over on the main Which? site – a unique opportunity to put your savings questions to Money Editor James Daley and others:


But hurry – it ends at 2pm!

How about this one? I and my wife had 1 year fixed interest rate ISA at Birmingham & Midshire BS at 4.5%. It expired in January however I did not realise this. Several months later when I realised, I got in touch with them and asked what happened to my bond, I was told, because I did not give them any instruction they put it into another account which was paying very little. I got in touch with FSA and told them. They told me to send an email to which I believe was Royal Bank of Scotland the owner of B&M BS, This I did but did not receive an answer. Then I sent an email to B&M telling them about FSA. They answered and told me that, they are very sorry and that they are very careful but they made a mistake and they did not inform me when my bond matured. Funny but they did not inform my wife either. So I demanded that the total amount should be updated to the present day at 4.5% both for me and my wife and add £25 per account for my troubles. They agreed and paid. So one should be careful about maturing fixed rate bonds!

conned by the banks
conned by the mortgage companies
conned by ISA providers
conned by the whole life bond sellers
conned by the pension schemes

it is theft and theft is a crime so is it not time all these people were held to account ?

Having been alerted by Which? to this practice some while ago I now change savings accounts every year and put a reminder in my diary/calender to check the rates the following year. Some providers, on request, will transfer the savings to their new/best rate account but if not I transfer it to another provider with a good interest rate. It’s a slight hassle but better than being conned.

At one time banks were criticised to make it difficult to change accounts.This was stopped, or at any rate reduced.

Then they discovered identity checks!

The current identity checks intended to prevent money laundering, with the onus on people to prove their innocense, are unlikely to deter real criminals. They spread fear and distrust and put citizens at risk of identity theft. They discourage honest people from making financial transactions, and from consulting professionals.

Even when no money is to be transferred many professionals demand intimate personal information that could make fraud easy if it found its way into in the wrong hands. The regulations also put solicitors, accountants and other professionals and their staff and families at risk of personal violence if they do come across real criminals and report them.

People who do not travel, do not drive, do not own a shotgun, and are not legal immigrants can only prove their honesty for the three months of the year after they have received a tax return form. If they are not taxpayers either, then they have no “identity” at all. Many women are unable to prove themselves simply because the household utility bills are in their husband’s name.

Citizens can also be required to travel to town centres and pay solicitors or other professionals to make a certified copy of their passports or driving licenses. This is a stealth tax, both to supplement the professionals’ income and also boost VAT and give a false impression of added value within the economy. Taken over the country as a whole, this is a substantial “carbon footprint” and adds to traffic congestion – something the government is supposed to be working to reduce.

Government agencies have plenty of data about people on electronic records, particularly with regards to tax, health and benefits. Instead of making citizens put themselves at risk over this, a system should be employed where checks can be made electronically to ensure that people are who they say they are and that their addresses are genuine. This is something the government wants, so there should be no charge to citizens. If it is something that the EC wants, then any costs should be met from the EC’s funds.

How much has identity theft crime increased since citizens have been told to prove their identities like this?

How much evidence is there that these regulations have reduced other crime?

Kathy says:
29 October 2010

My Dad is a pensioner, his savings earn him 0.5%, yet the bank will let him borrow for just 20%. This is scandalous! The banks should be paying a fair percentage on savings, after all they are using savers cash to lend and speculate.
He asked me if I knew of a co-op, where savers had got together and started their own investment bank. Couldn’t consumers start a class action against banks to force them to pay a fair return on their savings that are in effect being lent to the banks.

walter bunting says:
30 October 2010

I opened an investment account with Tesco finance at 2.7%.Checked online this week to see that I am still getting this and found that in May it changed to 1% and as from August a new one at 2.8% had been introduced.I have closed the account.Isnt this the same depressing story we are hearing all the time.I thought perhaps Tesco might operate more ethically,but clearly had seen how much money could be made by ripping people off and wanted part of the action.NO they did not inform me that they had done this.

I am amazed that so many people are so careless with their precious savings. When an interest rate is clearly advertised as having a certain bonus for 12 months is it so much trouble to make a note of the date and check? I have several accounts, all of which have clearly informed savers at the outset that the interest rate will revert to a lower figure after a certain date and think it is up to me to watch my money.