If you haven’t checked the interest rate on your savings recently, you could be earning as little as 0.1%.
Banks and building societies are busy cutting the rates that they pay savers. The falls impact easy-access accounts offered to new savers, as well as those that were on sale in the past. Thousands of savers are currently earning a pittance on cash languishing in more than 1,400 easy-access accounts, which are closed to new savers.
Banks and building societies routinely launch new accounts and then withdraw the old ones. They then quietly reduce the once top-paying rates in the hope that savers don’t notice. It means that if you haven’t checked your rate recently, you could be earning as little as between 0.1% and 0.3%.
Easy-access deals are by far the most popular type of account and are home to around £750 billion of savers’ money out of a total £1,209 billion in all household accounts, including cash Isas, fixed rates and notice accounts.
Tesco Bank is the latest to announce rate cuts. Its standard rate on its easy-access Internet Saver will fall to 0.35% on 24 October, down from 0.55%. Its Instant Access Savings rate drops from 0.4% to 0.3%, and Cash Isa from 0.65% to 0.35%.
Rates with TSB are set to fall this month. On 10 September, savers in its Easy Saver, eSavings and Cash Isa Saver will earn 0.15%, or just £1.50 interest a year on each £1,000.
Last month, Nationwide, Britain’s largest building society, cut rates on a host of old accounts to as little as 0.1%. Its e-Savings now pays this derisory rate, while Flexclusive Online Saver is down at 0.3% on balances up to £10,000, and its Limited Access Saver, Limited Access Online Saver and e-Savings Plus pay 0.5%.
Even new banks are getting in on the act – albeit the rates are better. The RCI Freedom account is down from 1.42% to 1.35%.
Loyal savers should not be fooled by any headline rate advertised by their provider – even if the account has the same or a similar name to their own. You could be in an old version of the same account, earning a far lower rate than the one offered to new savers.
For example, Britannia Select Access Saver is currently offering a rate of 1.4% to those willing to limit their withdrawals to a maximum of four a year. But this is only paid on Issue 10 of the account, on sale to new customers. Some issues of the account pay a lot less. If you have Issue 8, your rate is a much lower 0.6%, while issues 1 to 6 pay 0.7%.
Similarly, Virgin Money pays 1.16% on its Virgin Easy Access Saver, issue 32, now on sale. But those in issues one to 30 have seen their rate cut to a miserly 0.25%.
Or you could be in a bonus account that pays a top rate, but only for a year. Once the extra interest disappears, you can end up earning as little as 0.2%. With both Post Office Savings and AA Savings, backed by Bank of Ireland, the rate drops to 0.2% or 0.25% after a year. But the same providers are offering new savers a much better deal. Post Office Online Saver pays 1.15% to new account holders and AA Savings 1.11%.