Home Money There’s no rule to stop banks paying awful rates: SYLVIA MORRIS names the worst offenders

There’s no rule to stop banks paying awful rates: SYLVIA MORRIS names the worst offenders

by Elijah
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Rate cut: Savers who bought Santander's easy-access, better-paying Isa last year enjoyed a rate of 3.2%, but after a year it falls to a grim 1.2%.

Do you think you are a smart saver? So be careful. Often it is those who think they are getting the best deals who end up with the worst.

Take, for example, the thousands of savers who bought the easy-access, better-paying Isa from Santander last year.

While they have enjoyed a 3.2 per cent rate, if they don’t move their money before the initial one-year deal ends, they will see it fall to a dismal 1.2 per cent.

This is because Santander automatically moves your money from this main account to your Isa Saver, an old account that is no longer on general sale and which no sensible saver would choose voluntarily.

I had high hopes this would change when the Financial Conduct Authority (FCA) introduced new consumer rights rules last year.

Rate cut: Savers who bought Santander's easy-access, better-paying Isa last year enjoyed a rate of 3.2%, but after a year it falls to a grim 1.2%.

Rate cut: Savers who bought Santander’s easy-access, better-paying Isa last year enjoyed a rate of 3.2%, but after a year it falls to a grim 1.2%.

I would have thought that these regulations, which require financial services companies to guarantee good outcomes for customers, would have prevented savings providers from paying terrible rates on old savings accounts that are no longer for sale, while there are better rates on the news.

Banks and building societies were given 12 months to apply the consumer tax rules to their old savings accounts. But I don’t have much hope that rates will improve much by July.

Yesterday the FCA launched a £600,000 campaign to encourage savers to shop around, putting the onus firmly on savers to get a good deal.

And when I asked the FCA if it would require savings providers to improve rates on old accounts, it said no.

He pointed me to a hidden section of their rule book, conspicuously titled Finalized Guide for Businesses on Consumer Obligations.

In paragraph 3.22 of the document (FG22/5), it says: ‘We do not expect companies to move all existing customers to the latest version of a contract, nor to standardize pricing models for all legacy businesses.

Companies should review each product or service on its own merits and address any issues they find.

For example, we do not expect all legacy deposit accounts to offer the same interest rate; Instead, companies should verify that the interest rate provides reasonable value in the context of each product.

The FCA says it is not a price regulator, so it will not tell providers how much they should pay savers.

Some big banks have been working to comply with the new rules, but are still paying lousy rates. For example, NatWest has moved all savings from its old Instant Saver account to its easy-access Flexible Saver account, which is currently on sale.

But you’ll still get the same low rate, starting at 1.75 per cent on balances up to £25,000.

The best easy-access accounts pay around 5 percent. Barclays doesn’t have easily accessible old accounts, but pays a dismal rate of 1.65 per cent at best on its Everyday Saver account.

Santander, Halifax and Lloyds still offer new accounts with maximum fees that only last one year. Your money is then deposited into an old account with terrible interest rates.

Halifax has a Bonus Saver, an easy-to-access ordinary account, that pays 4.1 per cent if you make no more than three withdrawals in a year.

But, after 12 months, you end up in their off-sale Instant Saver, which pays 1.45 percent.

Halifax has other closed accounts that pay even less: just 1.3 per cent on the misnamed Bonus Gold and Extra Income Saver.

Lloyds offers a flagship Club Lloyds Advantage Saver of 4 per cent for a year, before moving it to its closed Standard Saver, where rates start at 1.4 per cent.

It also has closed accounts such as Flexible Saver, Online Saver, Platinum Saver and Premier Saver, paying between 1.4 per cent and 1.9 per cent depending on your balance.

Virgin Money’s old E-Saver and Easy Access E-Saver accounts pay an embarrassing 0.25 per cent. His closed Double Take account, which allowed two withdrawals a year, now pays just 0.35 percent.

Its new Defined Access E-Saver, which allows you to make three withdrawals a year, pays 5.11 per cent on issue 21. But some older issues from the same account pay only 1.75 per cent.


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Isa: make the most of your tax relief

You can get rates of more than 5 per cent tax-free by using your £20,000 cash Isa allowance for this tax year.

But act fast: The fiscal year ends on April 5, and you can’t carry over this year’s allocation to next year.

Suppliers are now fighting to get to the top of the best buy charts.

On one-year fixed rate cash Isas, Shawbrook pays 5.03 per cent on £1,000 or more; OakNorth pays 5.02 per cent with a £1 minimum.

It is 5 per cent at Aldermore and Castle Trust banks, both with a minimum of £1,000, and at Charter Savings Bank, but with a minimum of £5,000.

For easy-access cash Isas, Zopa comes first on 5.08 per cent with £1 or more, and Charter Savings Bank on 5.03 per cent with a minimum of £5,000.

Harpenden BS Online Isa pays 5.01 per cent per £1; Family BS Market Tracker is 5 per cent on £500 or more; Cynergy Bank pays the same rate with a minimum of £1.

If you don’t plan to make many withdrawals, you can opt for a “limited access” account.

The best rates come from Virgin Money’s Defined Access E-Isa issue 25 at 5.06 per cent, as long as you make three or fewer withdrawals a year.

Do more and you’ll earn 2 percent. But Virgin pays much less for older broadcasts. For example, number 17, which went on sale last summer, pays only 2.25 percent, so upgrade to a new one.

Check the best cash Isa rates in our savings tables

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