A worrying new savings trend
Banks are increasingly offering high interest rates to new savers only, with their existing customers barred from opening best-buy accounts.
Despite savings providers continuing to offer competitive rates, increasing numbers are restricting their best deals to ‘new money’ only. This means that customers who already have an existing account with the provider, or even one of its sister companies if it is part of a banking group, are not eligible.
The trend is particularly apparent in the instant access market, and across accounts that come with introductory bonuses. For example, an online savings account from Egg paying 2.8% AER, including a bonus of 1.55% for 12 months, does not accept transfers from an existing Egg savings account.
But several fixed-rate accounts come with similar restrictions. Stroud & Swindon’s ebond paying 4.05% until February 2011 does not allow transfers from any existing account.
David Black, banking specialist at Defaqto, says: “One worrying trend that has started to emerge is the launch of a number of savings accounts on the market that discriminate against existing customers by restricting funds deposited to ‘new money’ to the provider.”
With more banks and building societies now part of the same groups, the concern is that thousands of savers will not be able to benefit from a wide range of choice when picking new accounts and will not be able to take advantage of the best deals. Abbey, Alliance & Leicester and Bradford & Bingley (all part of the Santander group) have previously restricted best-buy accounts to ‘new money’ only.
But Black adds that restrictions shouldn’t put savers off moving their money: “While it remains the case that many savings accounts are languishing with very low interest rates, proactive savers can still get good deals if they’re prepared to move their funds around to new accounts.”
Five good instant access accounts (no 'new money 'restrictions)
| Provider | AER | Details |
|---|---|---|
|
Coventry Building Society Postal instant access |
3.3% | * Includes 1.3% bonus in year one * Save between £1,000 - £250,000 * Only four free withdrawals a year |
|
Alliance & Leicester Online instant access |
3.15% | * Includes 2.65% bonus until 02/08/10 * Save between £1 - £25,000 * No withdrawal restrictions |
|
Birmingham Midshires Telephone instant access |
3.15% | * Includes 2.65% bonus in year one * Save between £1 - £1 million * No withdrawal restrictions |
|
Sainsbury's Bank Internet saver |
2.8% | * No bonus rate * Save between £1,000 - £500,000 * Only three free withdrawals a year |
|
Newcastle Building Society Online saver |
2.5% | * No bonus rate * Save between £1 - £500,000 * No withdrawal restrictions |
Five good fixed-rate accounts (no 'new money' restrictions)
| Provider | AER | Details |
|---|---|---|
|
Barnsley Building Society Five-year online deal |
5.4% | * Save between £100 - £500,000 |
|
Yorkshire Building Society Four-year ebond |
4.5% | * Save between £100 - £500,000 |
|
ICICI Bank HiSave three-year deal |
4.6% | * Save from £1,000 |
|
The AA Two-year deal |
4.35% | * Save from £500 - £5 million |
|
The Post Office One-year deal |
3.85% | * Save from £500 |
