Are you being robbed by your bank?

The savings market has been booming! Thanks, in the main, to the Bank of England base rate hikes over the last couple of years and whilst borrowers have been feeling the negative effects it’s been hugely positive for savers. That said, although the base rate has increased from a historic low of 0.10% to its current level of 5.25% over that time, many savers will not have enjoyed rate hikes of anywhere near this level, from their savings providers. Is your savings provider playing fair? 

It’s a bit of a lottery as to how high existing savings accounts have increased when compared to those savings accounts available for new savers – and it won’t be too shocking to hear that the high street banks have not covered themselves in glory. 

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According to the industry regulator, the Financial Conduct Authority (FCA), Britain’s nine largest banks, on average, passed through just 28% of the base rate rise to their easy access deposits between January 2022 to May 2023. 

And 40% of all cash held in easy access accounts with these banks was earning less than 1% at the end of June – that amounts to some £260 billion that is missing out on rates of up to 5.20%. So, more than five times better. 

Away from the high street, other providers have been far more generous. Back in December 2021 Aldermore was offering one of the top paying easy access accounts on the market with its Double Access Saver Issue 1 which was paying 0.75% AER. Today, although savers in that account have not seen the full base rate rise passed on to their accounts, it is currently paying 4.90% AER – so is still very competitive. 

On the other hand, some of the high street banks have behaved very poorly. 

Barclays is one of the major culprits. Savers in the bank’s Everyday Saver account were earning a paltry 0.01% before the base rate started to rise in December 2021. But once the base rate did start to rise, savers in that account saw no change to the interest they were earning until 1st June 2022, at which point the base rate had already gone up by 0.90% to 1%. And even then, only those with a balance of more than £50,000 saw a rise to just 0.10%. It took until September 2022 for all other customers to see the rate they were earning rise to 0.15%, whilst for the larger savers, the rate was raised to just 0.25% - by then base rate had increased to 1.75%. Fast forward to today, with the base rate paying 5.25% Barclays customers are earning a ridiculously low 1.66% AER on balances of up to £10,000 and an even worse, 1.16% on any cash over this amount. Shocking behaviour.  

Incidentally, if Barclays has any excess cash that it needs to find a home for, it can park that at the Bank of England and earn Base Rate – so 5.25% AER. 

Barclays isn’t alone. And as a result of this blatant disregard for their loyal customers, the regulator, the FCA, was forced to step in. Earlier this year, it launched a 14-point action plan which will hopefully see banks and building societies offering fairer value to their savers or see the FCA take action. 

The 1st point on that plan is: "Require firms offering the lowest rates to provide their fair value assessments under the Consumer Duty by 31 August 2023 and take robust action by the end of 2023 against those who cannot demonstrate fair value. " 

As the example above illustrates, although the deadline has passed, some providers are making no effort to adhere to the FCA’s requirement and as of yet, there does not appear to have been any interaction from the FCA. So, we have to wait and see if they are serious about supporting savers. 

The table below shows the current rates on offer from the top high street banks and how much they have increased since the FCAs 14-point plan was introduced at the end of July this year. 

Source: Savings Champion 12th October 2022. Rates based on a balance of £50,000.

It seems pretty clear that there is a long way to go before the high street banks will be paying anything close to competitive rates, if ever. Top easy access accounts are now paying well over 5% – so why wait for them to do the right thing. You can vote with your feel right now. Many savers are already doing so - according to their latest financial reports, Barclays, Lloyds, NatWest and Santander have been losing savers money to the tune of £31 billion since the start of the year, from both savings accounts and current accounts. The latter is particularly interesting as current accounts usually pay no interest at all, so leaving too much in your current account means you are throwing money away.  But according to the Bank of England, there is still some £258 billion pounds in non-interest bearing current accounts. That’s a lot of money that could be working harder. 

Although many of the top savings' rates are at their highest levels in well over a decade, millions of savers are missing out because they are not managing their cash savings. 

  

Why? Well, many may be worried about using a provider they have not heard of, but for others it’s the anticipation of the stress and hassle that they could endure if opening multiple accounts. For others it’s simply that they don’t realise how much more they could be earning.  

But if you don’t switch you are turning down free money. That’s what it boils down to. If you don’t take the interest you deserve, that banks benefit and that means there’s even less incentive for them to do the right thing. 

How can we help? 

Given that every financial journey begins with cash, it’s vital to ensure that your cash is working hard for you, especially now while rates are so high. If you’d like to learn more about how we can help improve your returns, manage your money and keep it protected why not get in touch. We’re offering those with £100,000 in savings, investments or pensions a free initial review to map out what your financial future may look like. Get in touch to find out more. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

Savings Champion and their associated services are not regulated by the Financial Conduct Authority (FCA).

The Financial Conduct Authority (FCA) does not regulate cash advice.