Banks and building societies are swindling savers out of billions of pounds a year. We expose Britain's worst savings accounts.
According to the Bank of England, UK residents had over £580 billion on deposit at the end of June 2006. Shared equally among the UK's 48 million adults, this comes to over £12,000 per head. Alas, much of this cash mountain is owned by just a few million wealthy individuals.
What's more, according to independent financial researcher Moneyfacts (which powers the Fool's search engines for credit cards, personal loans, savings accounts, etc.), the average savings rate on a balance of £10,000 is little more than 3% a year. Given that the Bank of England's base rate is presently 4.75% a year, and that Best Buy savings accounts pay over 5% a year before tax, it's clear that millions of savers have their nest eggs in decidedly dodgy savings accounts!
Now for more bad news: hundreds of the four thousand or so savings accounts pay unbelievably low rates of interest. Indeed, some pay as little as 0.1% a year before tax on smaller sums, which comes to a pathetic 10p a year for every £100 on deposit!
In addition, almost every UK bank and building society offers shameful savings rates, as my exclusive research reveals. For the record, here is the savings accounts roll-call of shame, which reveals the lowest rates of interest payable on a balance of £1,000:
THE SAVINGS HALL OF SHAME
(Savings accounts which pay 1% a year or less before tax on £1,000)
Alliance & Leicester: Instant Access (0.25%)
BarnsleyBS: Falcon Instant (0.95%)
Bradford & Bingley BS: First Choice (1.00%)
Chesham BS: Bonus Saver (0.66%) and Flexi 30 (0.70%)
CheshireBS: Premium Access (1.00%)
Citibank: Instant Access (0.35%)
Clydesdale Bank: Savings (1.00%)
Co-operative Bank: Cashsaver (0.65%)
Derbyshire BS: Derbyshire Cash A/c (0.50%)
DudleyBS: Extra Special (1.00%) "Extra Special?" Hah!
First Trust Bank (NI): Select Savings (0.90%) and Instant ISA (0.90%)
Halifax: Liquid Gold (0.60%)
HSBC: HSBC/Morrison (1.00%) and Instant Access Saving (1.00%)
KentReliance BS: Easy Access (1.00%)
Loughborough BS: Instant Access (1.00%)
NewcastleBS: Nova Plus Issue 3 (0.85%)
Northern Rock: Instant Access (0.50%)
ScarboroughBS: Scarborough Standard (0.50%)
Ulster Bank (NI): Easy Access Savings (1.00%)
Universal BS: Money Master (0.60%) and 60 Day (0.65%)
VernonBS: Instant Access (0.75%)
West BromwichBS: Direct Easy Access (1.00%) and Premium Share (1.00%)
YorkshireBS: Cash Transactor (0.60%)
(Source: Moneyfacts; excludes offshore and non-Sterling accounts)
Every time that I conduct this research, the same old suspects keep cropping up. Tiny or massive, mutual (member-owned) or public limited company (shareholder-owned), all savings providers play the savings swindle game. Big or small, they cheat us all!
Thus, don't take comfort if you don't find your savings account on the above list, because it could well be below par. Indeed, it might be a real shocker, because I found scores more accounts paying annual interest rates of not much more than 1%!
So, take a long, hard look at your savings account documentation (or check online) to find the interest rate your nest egg or emergency fund is earning. If it's not bringing home at least 4.5% a year before tax, then move it NOW!
Finally, if you want to go straight to the top of the Best Buy tables, check out the easy-access ICICI Bank HiSAVE account, which pays a mighty 5.15% AER on £1+ with no strings attached, or the instant-access Citibank Flexible Saver account, which pays 5.20% for the first six months and then 4.75% thereafter (5.03% AER) on £10,000+ and includes a cashcard for fee-free withdrawals.
People, let's start a war today: death to substandard savings accounts!
More: Find tip-top savings accounts, bank accounts, credit cards and personal loans via the Fool!
Disclosure: Cliff owns shares in HBOS, parent company of Halifax.