We name and shame the banks paying just 0.01% on your savings
THOUSANDS of loyal savers are being paid pitiful interest rates by Britain's biggest banks.
Savings rates are generally poor, with top accounts only paying 3 per cent, but The Sun has found over 20 savings accounts paying under 0.10 per cent in interest.
There were accounts paying as little as 0.01 per cent and 0.03 per cent.
In July 2018, the City watchdog - The Financial Conduct Authority - announced plans to introduce a basic savings rate for the cash savings market.
The watchdog is concerned that the interest rates received by loyal customers are too low compared to what you get if you shop around.
But a year and half later savers are still waiting for confirmation on how the rate will work and whether it will help them.
The worst savings rates in the market
The worst offenders for savings rates are the six accounts paying 0.05 per cent interest..
The worst account pays just 0.01 per cent, the Citibank Flexible Saver Issues 1-12.
WHERE IS THE BEST PLACE TO SAVE YOUR CASH?
IF you want to get a better rate on your cash then you should consider a fixed rate account or look at a bank that pays higher interest on its current account savings.
Easy or “instant” access savings accounts are designed to allow you to withdraw your cash whenever you need it. They can usually be opened with an initial deposit of £1.
The top easy access rate is from the Family Building Society and pays 1.26 per cent on its Online Saver account.
Sticking your cash in a high interest current account would allow you the exact same easy access but also the opportunity to earn an interest rate up to 5 per cent – that’s 500 times higher than the 0.01 per cent rate.
Banks use high interest rates to lure customers to their current accounts as customers then tend to buy other products from the same bank. But, there are often a few hoops to jump through to get the high rates:
- Nationwide pays 5 per cent on balances up to £2,500 for the first year you hold a FlexDirect current account. You need to pay in £1,000 a month to get the rate (but you can take it out again).
- TSB’s classic plus account also pays 3 per cent but only on balances up to £1,500 and you need to pay £500 a month into the account to be eligible.
- Santander also have a current account paying up to 1.50 per cent interest on accounts up to £20,000, but you need a minimum income of £5,000 a month and at least £75,000 in savings
For a saver with £500 tucked away, a 0.01 per cent account would translate to 5p in interest per year.
If you had £1,000 you'd get 10p and even if you had £10,000 tucked away you'd only earn £1.
By contrast inflation is currently at 1.7 per cent, which means that if you're stuck in a low interest account your savings are actually getting less valuable in real terms.
Inflation is the rate at which the prices for goods and services increase.
This means that everything is expected to get 1.7 per cent more expensive over the next 12 months.
So if your savings are earning less than the inflation rate, the amount of stuff you can buy with your money goes down over time.
There were a whopping 31 accounts paying just 0.10 percent, including accounts from Barclays, Bank of Scotland, Halifax, HSBC, Lloyds and Nationwide.
Why savings rates are so low
One reason that savings rates are so low is because economic uncertainty is pushing investors towards savings products rather than stocks and shares.
Darren Cook, a financial expert at Moneyfacts explains: "Savings providers have generally received more deposits from investors who may have usually invested in more riskier investments.
"Providers may find themselves with extra cash deposits that they are unable to lend to their borrowing customers at short notice and they have no alternative but to reduce rates on their savings accounts to discourage further deposits.
"Savers need to shop around on a comparison site to find the best rates on offer, however, they must keep a look out for restrictions and they may need to be quick off the mark as higher rates may be here today but could disappear tomorrow."
But the FCA is concerned that banks are taking advantage of customers that don't switch and putting them on unacceptably low rates.
Christopher Woolard, executive director of strategy and competition at the FCA said: "Providers can take advantage of high levels of customer inaction to pay lower interest rates to longstanding customers.
"While many customers have valid reasons for not shopping around, providers must still treat them fairly, while maintaining competitive rates for those who do.
"Efforts to encourage customers to switch have had limited impact and we remain concerned about the way firms are treating customers.
"This is why we are considering the introduction of a basic savings rate for older accounts, which would promote competition and help get customers a better rate of interest."
How to find a top savings account
USE a comparison service to decide which account is best for you.
It's worth noting that you can earn more in accounts that lock your cash away for a set period of time.
But if you want to get hold of your cash then an easy-access account is best.
You may also want to weigh up whether to use an Isa instead, which is a tax-free savings account - although interest of up to £1,000 is tax-free anyway for basic rate taxpayers.
Higher rate taxpayers get a £500 personal savings allowance, although additional rate tax payers don't get anything.
Check out our round-up of the best savings accounts and the top Cash Isas.
How to beat the low rates
While the city watchdog is considering implementing a minimum savings rate, it is only at the discussion stage.
Until the regulations change, savers need to keep an eye on their accounts and shop around for the best deals they can find.
Fortunately, if your savings are languishing on low rates, it only takes a few moments to get a better option.
There are three main places you can check: savings accounts, cash ISAs, and high interest current accounts.
Fixing - where you choose to leave your money for a set number of years - often will get you a better rate.
Shop around and make sure you're putting your money somewhere it will work for you.
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