/ Money

Are you stuck in a substandard savings account?

The Chancellor’s 2014 Budget was packed with positives for savers, including an increase in the ISA limit. But there are billions of pounds still stuck in substandard savings accounts – and its time for action.

The savings industry needs to do more to better serve savers. We’re launching the Scrap the Savings Trap campaign calling on banks and building societies to step up and instigate changes that will make it easier for customers to make the most of their savings.

You see the savings market has some significant problems. Our research has found that in the current savings and cash ISA market, 82% of the 1,999 easy access savings accounts and cash ISAs are closed to new customers. Four in 10 of these pay 0.5% or less, of which 41% pay a pitiful 0.1% or less.

Sorry savings accounts closed to new customers

Many of these ‘zombie’ accounts have been superseded by newer versions, often with similar sounding names, offering attractive rates to new customers while at the same time reducing the rates for loyal existing customers. This is something Convo commenter Lessismore is all too familiar with:

‘It is hard to keep track of accounts with all their silly names. No wonder people get fed up with it and put their cash elsewhere. All you want is a decent rate of interest on the money you are loaning the bank!’

Take Halifax’s ‘Reward Saver’. This account pays up to 1.70% for a balance of £5,000.. But if you’re unfortunate enough to have the ‘Saver Reward’ you’re looking at a pitiful 0.1%. And Halifax aren’t the only ones. AA’s ‘Internet Saver (Issue 1)’ pays 1.36% for a balance of £5,000 while their ‘Internet Savings Account (Issue 1)’ pays 0.1%.

Calling for changes to the savings market

We’re calling for changes that ensure that banks and building societies don’t leave customers languishing in sub-standard savings accounts. We want them to close ‘zombie’ accounts, and stop them dumping customers savings into poor value savings accounts and ISAs at the end of fixed terms. Instead they should move people’s money into one default easy-access or ISA account.

We also want to improve the ISA switching process so it’s not as complicated and laborious. Finally, we’re asking savings providers to do more to help their customers get the best deal by putting interest rates clearly and consistently on all communications, improving notifications about the end of bonus rates or fixed terms, and ensuring better offers are promoted by staff and in statements.

Do you have a savings account or cash ISA that has seen better days? Do you know what you’re earning on the money you’re managing to put away? We’d love know what you think about the current market to further inform our campaign.


With BOE base rates stagnant at 0.5% and not forecast to increase for at least another year, this is indeed sombre news for savers, due partly to bank PPI compensatory payouts and increased lending to kick start the housing market, eagerly assisted by this governments ‘help to buy’ scheme, enabling them to profiteer on stamp duty increases which is dangerously heading towards another overheated house price bubble over which economists are already expressing concerns. Mark Carneys promises of 7% employment figures and increased base rates have come and gone. Despite recent upward trends and growth in the economy, interest rates remain the same. When a government continues to spend more of its GDP than it gains in revenue it automatically turns to its electorate to bail it out, leaving little hope for the prudent saver of receiving a decent return on their hard earned savings.

Savers at present are currently caught up in a constant delicate imbalance of manoeuvring and switching for a mere fraction of a percentage or two in order to try and eke out a few more pounds and make ends meet. Governments seem hell bent on blaming each other for the ‘mess’ this country is in instead of getting on with the job and working towards the recovery process, but with a general election on the horizon in 12 months time, we can no doubt look forward to more empty promises ahead.

Interest rates have been held down simply because the banks and building societies haven’t needed our money – QI has given them enough. Mark Carney’s 7% was a review point, not a promise. Tough on those with cash squirreled away but good for those with debts – unprecedently low rates for a long time. So some winners and some losers.
I have a view about interest on deposits: first, you are expecting somone else to work on your behalf to make your money work for you- that costs money and you can’t expect a big real return, for sitting back and doing nothing for it. Second, you could actively do something with your money – buy and sell, invest it in stocks and shares, and for your efforts and with more risk you could make better returns. I don’t think just having cash entitles you to great returns with no effort. I’m sure this will be an unpopular comment with some, but I just feed it into the conversation anyway.

QI=QE (!)

Stocks and shares are only suitable for those who have spare money that they can gamble and the time needed to keep a track on their investment. They should be treated as a longer term investment.

By buying shares may be supporting energy companies that pay their senior staff huge salaries, while a significant part of the population is struggling to pay their energy bills. Other companies (either deliberately or incompetence) sell unreliable household appliances that often break down soon after the guarantee/warranty expires, which helps their sales and profits. I would like to see these companies’ shares branded as ‘unethical’, along with unethical companies that sell tobacco products, use child labour, or underpay workers.

Which? Conversation has made me aware of the ways that some companies are exploiting the public. I don’t see any government tackling these issues, so we may be reliant on consumer action.

I do think that the public should be able to able to benefit from reasonable interest rates in simple, safe savings accounts and that the banks and building societies should be banned from playing the ‘zombie account’ game. On the basis that the cost of borrowing money is high, I cannot see why we should be denied a reasonable rate of interest.

wavechange, if we are talking of interest on savings it implies you are not necessarily using the capital. So investing in a selected portfolio of stocks and shares in an ISA will produce an income from dividends of 3 to 3.5% without great risk. Over time the capital will most likely increase – usually significantly better than the purchasing power of cash left in an interest account – which, incidentally, your bank or building society will be investing to enable it to pay interest.
Not investing because you brand many companies as rogues is a personal choice, but you might consider where your pension income comes from? Few of us are detached from the stock market.
I was simply making the point there are other ways of making your cash work for you – clearly depending on your personal circumstances..

Malcolm – I did not brand ‘many’ companies as rogues, though there may be many that are making too much money for senior staff and shareholders at the expense of their customers.

I am very aware that pension funds are dependent on stock market investment and the same is true of many of the financial products on offer to the public.

Going back to one of my earlier points, do you think it is right that senior staff in energy companies are paid more in a week than most people earn in a year, at a time when fuel bills are causing real hardship for some people?

I certainly believe that we should all be taking financial responsibility and saving for a rainy day and towards retirement, but I feel there is too much greed in society.

wavechange, there are many people who, I believe, are paid far more than they should be. However, this is not just energy companies – it is financial organisations, footballers, entertainers, some in public service and local authorities as well as other utilities and private industry. I do not subscribe to the view that if you don’t pay them they will leave, but it is a self-perpetuating system and I have no idea how you put a stop to it.
We are currently being persuaded that energy companies are the source of our financial woes. However, most of us will be spending much more on food, housing, car fuel and commuting – also essentials – with far higher impact on our living costs. We must be careful who we are persuaded to demonise and why. We need facts to back up the claims so that, hopefully, the outcome will be seen to be fair to all.

Malcolm – I totally agree that there are other examples of people being paid too much, but we are all dependent on energy whereas there is no need to contribute to the salaries of footballers and entertainers if we don’t want to.

You are right that the system is self-perpetuating, but it is hardly going to help if we ignore the problem. I accept that food and other costs have risen, but we have to start somewhere and perhaps energy supply may be the easiest target. Prior to privatisation, I wonder how many predicted the involvement of overseas companies in UK energy supply, never mind the high salaries I have mentioned. It seems logical to me that we should have kept control of our energy supply and that the profits of those companies involved should be capped by government.

Meanwhile, back to the topic. I think we can agree that it is important to encourage saving rather than living in debt. One way of helping to achieve this is to encourage people to save by offering safe simple savings accounts that yield a decent rate of interest without the danger of the banks and building societies exploiting customers who do not monitor their savings on a regular basis.

I agree with Wavechange in as much as consumers should be able deposit their cash into safe savings accounts and avoid risking the lure of the stocks and shares markets with money that has more than likely to have been worked for over a long period of time, [unless you are lucky enough to have inherited or maybe won the lotto!]

Banks are quite happy to maintain low interest rates for as long as possible since they were presented with £80bn of cheap capitol by the government under The Funding for Lending Scheme to enable them to lend to mortgage borrowers and small businesses with favourable returns without the need for capital investment from savers. It’s usually when banks, through their own mismanagement and greed and savers start queuing up to withdraw their life savings, as we saw earlier with Northern Rock etc., do they show any interest in their customers. QE or Quantitative Easing strategy is just a way that central banks operate in order to bail out a failing economy by buying assets using money out of thin air and transferring it electronically without even the need to print it! Mark Carneys promises [or Forward Guidance Policies] is a terminology he uses to predict future outcomes but financial markets remain cautious that he does not renege on these.

It is when interest rates start to rise, and even Mark Carney is unable to predict exactly when this will happen as it depends largely on the potential gap between income and spending on essential and discretionary goods, as already pointed out in another recent Conversation, will we have cause for concern, not then perhaps for savers but for people tied to debts they can no longer sustain.

Beryl, you are right with your concern about those with debt – if savers benefit through interest increase, debtors will find life more difficult, and we will then be worrying about whether debt is sustainable. There is a balance – we need to be weaned off living on money we don’t have by excessive borrowing.
The main essential debt is in housing, prices largely fuelled by lack of supply and high land prices. – and providing housing at affordable prices should be our major priority, affecting both those purchasing and those renting. Since local authorities have the power to grant planning permission on land, and see it’s price enormously inflated, perhaps there lies a solution. Limit the price at which land can be sold for housing. It will still be attractive to sell, rather than leave vacant. Perhaps the land should be sold to local authorities and then leased to the house buyers? Any ideas?
Incidentally, I am in favour of simple interest rates wavechange – not with short-term bonusses that get forgotten when they expire.

To a certain extent, the saver should be aware of what his savings are doing and, while I agree that banks are opaque and don’t readily give out information, it’s down to us to move accounts. I have key dates in the diary when I need to think about possible interest movements. The chancellor can be magnanimous and raise ISA allowances, but this is something of a joke when account interest rates are so poor that there is hardly any tax to deduct anyway. The only reason for using the cash ISA is the hope that money invested will, eventually, accrue a tax free benefit. Since these accounts are ring fenced, one has to have money in over the years to be available when this miracle occurs. As far as stocks and shares are concerned, this is a long term gamble. Though the market is recovering, one has to have the correct investment portfolio or it is still possible to lose money rather than make any. This means careful study and/or financial advice. There are buying fees and selling fees in addition to the advisors percentage. That’s not for me. I have happy memories of the Bradford and Bingley shares that were given to me. At one time my £250 was worth nearly £1000. Shortly afterwards they were worth nothing -easy come, easy go!

DerekP says:
27 June 2014

I think all savings accounts are substandard at the moment. There seems to be no easy way of getting any interest rates that will even keep place with inflation.