If you have one of these awful savings accounts, then you're losing money instead of making it.
Here at The Fool, we urge everyone to have an emergency fund to fall back on when times are hard. Ideally, this rainy-day money should be in an easy-access savings account which pays a decent rate of interest, say, 5%+ a year before tax.
Furthermore, you should keep an eye on your savings interest rate to ensure that it consistently beats inflation (rising prices). Alas, one measure of inflation, the Retail Prices Index (RPI), has reached its highest level for almost a decade, hitting 3.9% last month. Hence, in order for your savings to keep up with the RPI, they need to grow by, say, 4% a year -- and that's after tax.
Thus, basic-rate taxpayers paying 20% tax on their savings need to earn 5% a year before tax, and higher-rate (40%) taxpayers need to earn an impossible 6.7% a year before tax, to beat the RPI. Thank goodness for the mini cash ISA -- a savings account which pays tax-free interest!
Now for the really bad news: tens of billions of pounds are kept in truly awful savings accounts which pay pathetically low rates of interest. According to independent financial researcher Moneyfacts, the average savings account pays an annual interest rate of 2.7% a year, which is almost half the Bank of England's base rate (currently 5% a year).
Then again, there are hundreds of accounts which fail to reach even this miserable hurdle, as my research for The Motley Fool reveals. Recently, I asked Moneyfacts to supply me with a list of all the savings accounts which pay an annual interest rate of less than 2% on £1 -- and I was amazed at how many accounts this search threw up!
At the outset, I had intended to list each of these accounts, together with its interest rate, withdrawal restrictions, and other terms and conditions. However, this would have created the longest article ever seen at the Fool, so I've restricted myself to simply 'naming and shaming' all of the accounts which pay under 2% a year before tax on small balances.
(Deep breath!) Here they are: 133 different accounts from 77 different providers, in A-Z order based on the provider name:
Provider | Account name |
|---|---|
Abbey | Branch Saver |
Alliance & Leicester | Instant Access |
Bank of Cyprus UK | Instant Access |
Bank of Ireland (NI) | 90 Day |
Bank of Scotland | Halifax Bonus Gold |
Barnsley BS | Falcon Instant |
Bath BS | Lifestyle |
Beverley BS | Instant Access |
Birmingham Midshires | Postal Easy Access |
Bradford & Bingley | First Choice |
Britannia BS | Flexible Saver/CashCard |
Buckinghamshire BS | Added Advantage |
Cambridge BS | Instant Sapphire |
Catholic BS | The Railway Children |
Chelsea BS | Instant Option |
Cheltenham & Gloucester | Branch 10 |
Chesham BS | Bonus Saver |
Cheshire BS | Easy Saver |
Chorley & District BS | Chorleian Share |
Citibank | Instant Access |
City of Derry BS | Extra Instant Access |
Clydesdale Bank | Savings |
Co-operative Bank | Cashsaver |
Coventry BS | BranchSave Passbook |
Cumberland BS | Cashcard Cashcard Flexible Acct Instant Savings |
Darlington BS | Affinity Accounts |
Derbyshire BS | Branch Instant |
Dudley BS | Extra Special |
Dunfermline BS | Dunfermline Gold |
Earl Shilton BS | Capital 90 |
Ecology BS | Eco Instant |
First Direct | Everyday Savings |
First Trust Bank (NI) | Select Savings |
Furness BS | Instant Access |
Halifax | Bonus Gold |
Hanley Economic BS | Instant Access |
Harpenden BS | Escalator Shares |
Hinckley & Rugby BS | High Rise |
Hoare & Co | Deposit |
HSBC | Instant Access Saving |
Ipswich BS | Premier Instant |
Kent Reliance BS | 90 Day Notice |
Laiki Bank | Instant Access |
Leeds BS | Capital 7 |
Leek United BS | Pyramid Share |
Lloyds TSB | Reward Savings |
Loughborough BS | Instant Access |
Manchester BS | Premier Instant |
Mansfield BS | Prime Access |
Market Harborough BS | 30 Day Notice |
Marsden BS | Aquarius |
Monmouthshire BS | Escalator Bonus |
National Savings & Investments | Easy Access Savings |
Nationwide BS | CashBuilder |
NatWest | First Reserve |
Newcastle BS | Key |
Northern Bank (NI) | Summit Savings |
Northern Rock | Instant Access |
Norwich & Peterborough BS | Easy Plus |
Nottingham BS | Access Bonus |
Portman BS | Instant Access |
Principality BS | Instant Access Savings |
Progressive BS | Investment Share |
Royal Bank of Scotland | Bonus 90 |
Saffron BS | Cashbuild |
Scarborough BS | Easy Saver |
Scottish BS | Scotline |
Shepshed BS | 28 Day Share |
Skipton BS | High Street |
Stroud & Swindon BS | Classic Gold |
Tipton & Coseley BS | Instant Access |
Ulster Bank (NI) | 55 Plus |
Universal BS | 60 Day |
Vernon BS | Instant Access |
West Bromwich BS | Bonus Saver |
Yorkshire Bank | Instant Savings |
Yorkshire BS | Cash Transactor |
Source: Moneyfacts, 21/11/06
So, if you have money in these accounts, don't delay: check your rate today. If you're earning a poor rate of interest, vote with your feet by moving to a Best Buy savings account. Otherwise, you could be earning as little as 0.1% a year before tax on your spare cash, which is nothing short of criminal!
More: Use the Fool to find tip-top savings accounts and current accounts