Interest rates on traditional savings accounts are now so poor that many of us are deciding to choose alternative homes for our money. But is it really time to turn our back on them altogether?
Earlier this month, I appeared on Channel 4’s Dispatches programme, which investigated the struggle that savers are facing to secure a decent deal for their cash.
Much of the programme covered ground that Which? has been reporting on for years – poor communication about rate changes, savage cuts from the biggest institutions and how banks fail to describe the protection your savings are given.
Despite our efforts, and programmes such as Dispatches, savers on the whole remain in a state of paralysis – settling for poor rates in exchange for the convenience of housing their savings with their bank account provider.
But as sad as it is to see that this simple market is still malfunctioning, you can beat the banks by looking elsewhere.
Looking elsewhere for better savings rates
For years now, non-banking brands have sought to get a foothold in the savings market, with the likes of the AA, M&S Bank, Sainsbury’s and Tesco offering accounts. But if you feel comfortable getting even further off the beaten track, you could pick up a better deal.
Punjab National Bank launched in the UK in 2007, and has gathered attention by paying 2% on its instant-access cash Isa, way ahead of its nearest rival. And RCI Bank – an offshoot of car manufacturer Renault – currently pays the best rate for normal easy-access savings accounts.
There are caveats. Punjab’s account can only be opened in one of its seven UK branches. And RCI Bank isn’t covered by the UK’s compensation scheme – it’s covered by the French equivalent, which protects the sterling equivalent of €100,000, currently £70,000. The UK scheme protects £85,000.
In the hunt for better rates, a passionate minority of people have now turned to peer-to-peer lending. This burgeoning billion-pound industry connects investors with those who want to borrow, paying almost double what you can get on the high street.
We’ve explained the risks and rewards, gathering customer satisfaction scores for the biggest services.
After years of misery and mistreatment by the old guard, now might be the time to turn your back on the mainstream for good.
Have you found alternatives to traditional savings accounts that are working well for you?