How banks penalise their most loyal savings customers

Easy access account rates have risen, but loyal savers can miss out, explains Sylvia Morris.

Savings rates on easy access accounts have finally been creeping up, with the top rate now 1.5%. But often this rate is only available to new customers.

Banks and building societies used to pass rate rises on to all savers in variable rate accounts, but now most of them only offer a higher rate to new customers. Loyal savers continue to earn the lower rate, which in the worst cases can be as low as 0.25%.

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Banks and building societies do this by closing lower-paying accounts and launching new accounts with better rates. A new account will have the same name but a new issue number. Savings experts say firms hope loyal savers won’t notice the new offer or will think they are earning the higher rate. Providers will sometimes even launch a new top-paying account and ban existing savers from switching into it.

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Post Office’s Online Saver rate rose to 1.45% last month, but the new deal only applies to those who opened Issue 38, on sale from 6 June. Older issues pay less. For example, Issue 32 pays 1.15% and Issue 29 1.05%. And regardless of what issue you are in, once you have been in an account for 12 months, your rate tumbles to a derisory 0.25%.

Cynergy Bank has raised the rate on its Online Easy Access account to 1.5%, but only for new savers opening Issue 23. Some older issues pay just 1%.

Virgin Money’sDouble Take E-Saver, which restricts savers to making two withdrawals a year, also pays 1.5%. But you only earn this rate in the latest version, Issue 10. Savers in previous issues earn one of several different rates – all lower than 1.5%. The lowest is 1.2% on Issue 5.

Meanwhile, the bank’s Easy Access Saver Issue 32, available to those who would rather run their account through a branch, has no withdrawal restrictions and pays 1.16% to new savers. However, those in some older versions of the account earn a paltry 0.25%.

Yorkshire Building Society has launched new accounts paying as much as 1.4%. But its loyal savers have been barred from moving their money in from the society’s other, lower-paying accounts. Savers only earn the top rate for 12 months and can only make withdrawals on one day a year. Money is shifted out of Yorkshire’s online One Year Limited Access Saver after 12 months and into its Limited Access Saver Issue 1, which has a lower rate. Yorkshire’s similar, branch-based Annual Access account works in the same way.

Yorkshire has also made cuts to a host of rates on existing accounts. Among the worst is a 0.55 percentage point cut to the rate on its e-Isa to 0.5% for those with £20,000 or more in their account. Those with lower balances saw their rate halved to 0.5%.

Louise Halliwell, senior savings manager at Yorkshire, says: “As a responsible building society, we need to make sure we don’t get more money in than we can sensibly lend as mortgages.”