/ Money

Loyalty doesn’t pay when it comes to savings

Dog looking loyal

New Which? research shows that the longer you have held your savings account the more likely you are to be earning a pitiful rate of interest. And the chances that are your bank doesn’t want you to know.

Loyalty pays, right? Wrong. At least not in the world of savings. We’ve found that spending more time with one savings account actually increases your chances of ending up on a pathetic rate of interest.

For example, almost nine in 10 savings accounts that were available six years ago are now paying just the base rate of 0.5% or less and two thirds are paying a shocking 0.1% or less.

Savings are going stale

And if you opened your account 10 years ago, you’ve even more chance of finding that your savings interest is barely worth your while.

Compare this with the 2.9% you could currently be getting from a Best Rate instant-access savings account. This would give you £112 more interest a year (after basic-rate tax) on a £5,000 balance than if you were earning 0.1%.

Despite this, our research shows that more than a third of savers still have money in a savings account they opened six years ago or more.

On average, UK savers with instant-access, notice and cash Isa accounts could be £322 a year better off if they switched to Best Rate versions of their accounts.

So why don’t we switch? Part of the reason is that banks and building societies often don’t provide us with the information we need to realise how poor the interest rate we’re getting is.

Do your homework

In our research, almost four in 10 savers said they won’t switch because they think all savings accounts are pretty much the same.

Savings providers often lure us in with attractive rates and then gradually reduce them to paltry levels. But many don’t print the interest rate you are currently getting on your statement. We are campaigning for banks and building societies to change this.

Don’t let your bank take you for a ride. Visit our unique Savings Booster tool to find out how much interest you are earning now and how much more you could be getting by switching to another account with your existing bank or elsewhere. Or watch as your savings stagnate.

Doug says:
14 January 2011

All savings accounts I have seen have a rate of interest kower than inflation – except possibly a few which have very long periods of investment. So – you lose which every way you go. Meaning that if you have, say, 5% interest rate over a period of 5 years or more the chances of other interest rates increasing to offset inflation are high – so you need to get out for a better rate and suffer a withdrawal charge.

Richard says:
14 January 2011

I am treasurer of a charity with £43,000 in a “high interest” (must be joking) deposit account with a high street bank. Last year, 2010, we received £8.62 interst for 12 months savings. We need to have instant access because of the possibility of unforseen expenses. This is beyond a joke. The banks are just a law ubto themselves and only interested in making maoney for themselves and their shareholders.

I think it is unfair to be slagging of the banks, RBS for example have to raise £2,000,000 for the boss-mans bonus, they have to get this money from somewhere, right? So quietly, but legally, not informing their loyal customers of the options available to earn more interest on their hard earned savings is one way of raising this much needed bonus money. Check out the options avaiable with other banks, move your money to better accounts, and stop being loyal to your bank, I have after approx 45 years, I have kept my current account, with the minimum I need in it for daily use, then transfer surplus to another bank which has a better rate of Interest for a year, with the new customer bonus rate, when the year is up I will move to another account paying new customer bonus, worth about £250 a year (or almost weeks extra wages) for a few minutes on the internet.

Andrew says:
14 January 2011

I don’t understand the concept of being ‘loyal’ to a bank any more than being loyal to a petrol station or a place to buy groceries. Why should we expect a bank to ‘reward’ customers? After all, their primary purpose is to make money for their shareholders, so it’s hardly surprising that they use the strategy of reducing interest rates after a year or two. It is the responsibility of the consumer to shop around just as you should if you wanted to buy a television (for example): it’s just a different sort of product. If people can’t be bothered to check what interest rate they are getting then it’s their fault if they are not getting the best they can. With such easy access to information these days, both comparison and the banks’ own websites there is little excuse.

Martyn says:
15 January 2011

For some time now inflation has been above the pityful intrest rates paid by all the British banks who appear to be in league to maximise profits for shareholders and employee bonuses. The people paying for this are the Taxpayers and the millions of people who saved during the the near collapse of these “Nose in the Trough” organisations. The majority of these people were not responsible for the banking problems.
The Government should instruct the banks “owned by the people” like RBS etc , to introduce higher interest rates to encourage all savers to transfer their savings from the the “faulty” banks. This would enable the Goverment to exert pressure to start money flowing into small and medium sized firms who are currently being denied this facility. All this direct action might send the greedy bankers a message that some of them could go to the wall if they don’t change their attitude towards the mass of small savers. The Government of this country need to take control to kick start the system.The banks have demonstrated they are incapable of doing this on their own.
I’m no “Lefty” , but I don’t like being mugged !

I would love to see this happen!