Revealed - the savings accounts paying no interest
HSBC and its sister bank First Direct are paying literally no interest at all to some savings customers, according to a ‘sunlight’ report that names and shames the worst savings rates offered to loyal customers.
The Financial Conduct Authority's (FCA) survey of 32 banks and building societies found at least 21 are paying 0.1% interest or less, either on currently or previously available instant access savings accounts and Isas.
Among the main high street providers, Bank of Scotland, Barclays, the Co-Op, Halifax, HSBC, First Direct, Lloyds, the Post Office, Santander and TSB were found to be paying rates that were just a fifth of the base rate or worse to some customers. Challenger banks were no better, with OneSavings Bank, Virgin Money, Danske Bank and a number of building societies all in the same boat.
The regulator believes ‘significant amounts of consumers balances’ are sat in old accounts, opened five or more years ago, earning rates far lower than those currently available.
Danny Cox, Chartered Financial Planner, Hargreaves Lansdown, said: “This is a wakeup call to the banks and building societies which are turning a blind eye to savers who are left abandoned in zombie accounts.
“It’s clear more needs to be done to help people compare interest rates and then make it easier for them to switch."
From December 2016, the FCA will oblige banks to tell customers how much interest they are receiving on their savings, and warn them when introductory bonus rates are due to expire.
It will also make it easier for people to get an ‘at a glance’ view of the interest being earned on all their savings accounts, and make it easier to switch Cash Isas where necessary, following similar successful interventions in the current account market.
“Our rules are about giving consumers the facts they need to make an informed decision about what to do with their savings, and the ability to act on it quickly,” explained Christopher Woolard, Director of Strategy and Competition at the FCA.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.