It appears that Britainís banks and building societies have strangled the endeavours of the countryís savers after it emerged that they have slashed rates on the amount of interest that is paid out by nearly £1 billion in the past year.
The year between March 2013 and March 2014 appears to have been a dire one for saving account holders, after an analysis of the rates offered by providers during the course of the year revealed that rates on savings accounts had fallen for both new and old products, despite the Bank of Englandís base rate remaining the same for the duration of the year.
It means that millions of individuals have been forced to accept lower returns on their savings on completion of their fixed rate deals in the past 12 months, and have been given a poor platform to financially prepare for when interest rates do rise in the future and necessitate highly monthly outgoings from credit repayment.
The Bank of England released a compelling document online which described the movement of rates attached to easy-access savings accounts in the year to March 2014.
It illustrated that in March 2013, UK savers had placed £481 billion of their money into accounts at an average rate of 1.04%. However, as of March this year, this average rate has plummeted to just 0.75%, meaning that savers stand to receive hugely low returns on the money they put into their easy-access accounts at present.
Alarmingly, the total amount of money collectively placed into savings accounts by UK account holders rose during the same period by £55 billion, meaning that rates have fallen whilst demand has risen. The statistics are implicit that banks have felt less compelled to raise their rates as they have managed to obtain new customers without improving their rates, highlighting the lack of consumer orientation within the banking sector.
Industry experts have argued the rise in the usage of easy-access accounts is down to an underlying reluctance by consumers to palace their money into fixed rate accounts, with the Bank of England expected to raise their base rate sooner rather than later in a move that is expected to finally relieve savers from the torrid low rate offerings they have been subjected to in the past two years.
Unsurprisngly, the figures on the total interest paid out by providers in 2013 compared to 2014 painted a hugely negative picture of the current condition the savings account market is in at present in the UK, with a decline from £5 billion in March 2013 to just £4.02 billion in March 2014 representing a huge fall of over £980 million.
Simon Rose of campaign group Save Our Savers argued: “These calculations are truly shocking, and show there is nowhere for savers to turn.
“The Government might have had a ‘Budget for savers’ but the elephant in the room is interest rates, which have been left so low that many people who rely on the returns from savings are struggling to maintain living standards.”
The largest cuts in the past year have been made on older, fixed rate products which have long passed their initial introductory. Often described as ëzombie accountsí these are products that are still used by savings accounts holders, but have had their rates slashed so low that they often amount to just 0.01%, with suppliers simply exploiting the fact that many people are either unaware of newer offerings or are apathetic with the industry as a whole.
Over 500 people have been affected by rate cuts in accounts such as these in the past year, with the latest case of this occurring being attributed to NatWest, who slashed their rates on their e-savings easy access account to just 0.5%, from its previous value of 1%.
There has also been other contrived rate cuts made by big and small financial institutions, with some market analysts highlighting that the recent rate reductions could be a response to the governmentís raising of the Isa allowance to £15,000, set to be officially instigated from July 1st. In particular, HSBCís decision to lower their rates on their Cash e-ISA to just 1.7% from 2.75% for those who have deposited over £15,000 seems to support this theory.
Mr Rose said: “Showing loyalty to a bank is about as sensible as befriending a wild animal and likely to have the same sad result. In a just world, those who stick with a financial institution should be rewarded. In reality, the longer you’re with them, the more likely they are to stiff you with money left in old accounts.”
Susan Hannums of SavingsChampion said: “Saving is essential for young people these days, for anything from holidays to houses, but this generation has probably never experienced ‘real’ interest on their savings balances.”
Avoid the zombie account ëtrapí
The mistreatment of bank account holders by providers seems to have finally reached politicians, with economic secretary to the Treasury, Andrea Leadsom, last week urging the banking sector to ëplay its part to support saversî. It is widely believed that she making the remarks on the backdrop of recent dater released by consumer group Which?, which disclosed that savers were being shafted out of £4.3 billion each year by falling into the ëzombie account trapí.
If you are someone who is aware that the introductory rate on their savings account has expired, but has continued to use the account for saving purposes, then you should look into closing the account down as soon as possible and begin searching for a better deal, as you could be making a substantially higher return on your money than you are at present.