Recent research by George Nixon at The Times, found that high street banks are leaving savers billions of pounds out of pocket by passing on just a fraction of the base rate hikes that we have seen for over 18 months.
According to the Financial Conduct Authority (FCA), 40% of all cash held in easy access accounts with Britain’s nine largest banks was earning less than 1% at the end of June – that amounts to £260 billion that is missing out on far better rates of interest.
The FCAs deadline for the worst savings providers to buck up their ideas and pass more of the base rate increases onto their long-suffering savings customers, has been and gone.
The regulator had given those offering the worst deals until Thursday (31st August 2023) to improve or justify that what they are offering is ‘fair value’.
It’s therefore disappointing, although not unexpected, that there are still a number of banks, including many of the big high street brands, still offering rock bottom rates. In fact 18% of all easy access on sale accounts pay less than 2% - even though the base rate is now 5.25% and expected to rise further.
Union Bank UK is paying the lowest rate of 0.02% on its Call Deposit account and Turkish Bank (UK) is paying between 0.05% to 0.10% depending on the balance held.
But it’s the high street banks that are letting the most people down, as although the rates on offer are not as low as this, many of the easy access accounts on sale are still paying less than 2%. And these providers hold a large proportion of UK savers cash.
Rates based on a balance of £10,000
It’s not just the on-sale accounts that need to be reviewed though. It’s long been recognised that closed, off-sale accounts can be forgotten and therefore are open to being neglected. Santander recently made a surprise move by launching a new Easy Access Saver Limited Edition (Issue 3) paying 5.20% AER. But if you open this account, after 12 months your cash will be moved to its Everyday Saver which was removed from the market in July this year, and that account is paying just 1.05% AER.
It’s disgraceful that it’s got to the stage where the regulator has had to step in to effectively force some providers to do what, let's face it, will be the barest minimum – if anything. In the meantime, whilst not passing on the rate hikes to their customers, the banks themselves are earning base rate with any access cash they leave with the Bank of England.
But savers don’t need to put up with this shoddy behaviour – the top easy access rates are the highest they’ve been in almost 15 years, and it’s now possible to earn just shy of 5% for unrestricted access to your cash. Take a look at our Easy Access Best Buy table for the latest rates.
One of the reasons that the high street names hold so much of people’s cash is that they are trusted, well-known brands. And a lot of savers are worried about moving their cash to a bank or building society that they have not heard of. But, as long as the new provider is authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA, then your cash will be protected by the Financial Services Compensation Scheme (FSCS). This means that up to £85,000 per person, per banking licence, would be protected in the unlikely event of your provider going bust.
Of course, in this day and age of internet scams, it does make sense to be cautious of any unsolicited emails that offer savings accounts that seem too good to be true. But there are simple things that you can do to protect yourself. First, check our Best Buy tables to make sure any account you are interested in is included, as we monitor the whole of the UK savings market and our tables are uncompromised and unbiased. If the rate you have seen is paying more than the top five in our tables, you should make more enquiries. You can check on the provider’s website but don’t click a link on the email you’ve received. And if you want to be really sure, you can find the bank in question on the FCA register and use the contact information found there.
The bottom line is that you don’t need to leave your cash languishing in a poor paying account - vote with your feet and start earning more interest right now.
@savingschampion
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