Why Savers Should Be Wary

Savings and ISAs

Updated on 16 December 2008 | 0 Comments

If you're a saver, has your bank or building society passed on the recent base rate increase to you? If so, make sure it's a genuine increase!

While people with mortgages may not have cheered when the Bank of England put up base rates the other week, those with savings probably felt rather happier. Several banks and building societies rushed out press releases saying that they would be passing the increase on to their savers.

That's all well and good for those savers for whom the increase would be meaningful. For others it makes little or no difference at all because they've already suffered a drop in interest rates in recent months.

According to financial advisers, AWD Chase de Vere, the worst culprit is Alliance & Leicester which cut three of its accounts (EasySaver, PhoneSaver and OnlineSaver (closed issue) the day before the Bank of England's meeting claiming "Our savings rates are not directly linked to the Bank of England base rate and the difficult decision to reduce rates was made in order to ensure a balance between our overall competitiveness and costs"

The day after the Bank of England's increase from 4.5% to 4.75%, it promptly announced that they would be "passing on the full 0.25% benefit to all EasySaver, PhoneSaver and OnlineSaver (closed issue) customers."

Crafty, eh?

Marks & Spencer also comes in for some stick having cut its rate for its cash ISA by 0.25% in early July. A month later it too announced that it would be passing on the rate rise to its customers.

So, although the base rate has gone up, savers with the relevant accounts with A&L and M&S haven't really benefited at all. As it happens, A&L has some good savings accounts. For example, regular savers who've got up to £250 a month to invest over the coming year can get a very generous fixed rate of 10% with its Premier Regular Saver account.

Nevertheless, as ever, we really do have to keep an eye on the banks and building societies that we do business with to make sure they're not trying to pull a fast one. It's a shame we've got to do it, but that's the financial services industry for you!

> Compare savings rates here at the Fool

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