Beat the high street – savers urged to switch from low-paying accounts

Published by Adam Williams on 25 September 2017.
Last updated on 25 September 2017

Beat the high street – savers urged to switch from low-paying accounts

Savers could be missing out on hundreds of pounds a year by leaving cash languishing in high street accounts paying minuscule interest rates.

Analysis conducted by comparison site Savings Champion for Moneywise shows that five of the UK’s biggest banks are offering easy-access savers rates that are significantly below today’s top deal.

The rates found at major UK-wide banks leave those with even a small savings pot out of pocket.

For example, both the Lloyds Bank Easy Saver and Santander Everyday Saver pay 0.1% interest a year, the Barclays Everyday Saver offers 0.05% while the HSBC Flexible Saver and NatWest Instant Saver both return a miserable 0.01%.

By comparison, the Moneywise Best Buy – the Ulster Bank eSaver – pays 1.25%.

For someone with a £5,000 savings pot, the difference between HSBC and NatWest’s paltry rate and the Moneywise Best Buy is £62 a year. For savers with bigger balances, this difference is in the hundreds of pounds.

See the table, below, to see how much more interest you could earn each year by swapping accounts.

Battling inflation

No matter what account you pick, it is almost impossible to prevent the value of your savings being eroded by inflation. According to the Office for National Statistics (ONS), the consumer prices index rate of inflation including the cost of housing (CPI-H) – its preferred measure of inflation – was 2.7% in the year to July 2017 (the latest figure available at the time of writing).

No available-to-all savings accounts currently offer a rate that beats this. A few accounts do pay more than inflation, but each requires a linked current account to open one.

The First Direct Regular Saver, HSBC Regular Saver, M&S Bank Monthly Saver, Nationwide Flexclusive Regular Saver and Santander 123 Regular eSaver all pay 5% to savers if you have a qualifying current account. The Lloyds Bank Club Lloyds Monthly Saver pays 3%, also beating inflation.

Remember these accounts are regular savers – designed for you to drip feed cash into over the course of a year rather than deposit a lump sum. Each limits the amount you can pay in each month. See our table for full details.

For example, First Direct’s 5% regular allows deposits of up to £300 a month, but you only earn interest while your cash is in the account. This means your first £300 deposit earns 5% interest for a full 12 months, the second £300 earns it for 11 months and so on.

Provider and account name

Rate (AER)

Savings limits (per month)

First Direct Regular Saver

5%

£25 - £300

Nationwide Flexclusive Regular Saver

5%

£1 - £250

HSBC Regular Saver

5%

£25 - £250

M&S Bank Monthly Saver

5%

£25 - £250

Santander 123 Regular eSaver

5%

£1 - £200

Lloyds Bank Club Lloyds Monthly Saver

3%

£25 - £400

Source: Moneywise, 14 September 2017

Vote with your feet

There are also good rates of interest offered by current accounts themselves, although each has minimum monthly pay-ins and other restrictions. The Nationwide FlexDirect Account pays 5% interest on balances up to £2,500 for the first year, but this drops to 1% thereafter. You must deposit at least £1,000 each month into the account to earn this 5% rate of interest.

The Tesco Bank Current Account offers 3% on balances up to £3,000 if you can pay in at least £750 and pay out three direct debits each month.

Finally, the TSB Classic Plus Account pays 3% interest, but only on balances up to £1,500. You must pay a minimum of £500 a month into this account and register for internet banking and paperless statements.

Anna Bowes, director at Savings Champion, says: “With savings rates with the high street providers paying as little as 0.01%, it’s time for savers to vote with their feet and earn as much interest as they can elsewhere, using all the tools in their armoury – including high-interest- paying current accounts.

“Some of these are offering inflation-beating rates, but there are a few more hoops to jump through to ensure you earn the headline rate of interest.”

Provider and account name

Rate (AER)

Interest earned based on amount deposited

 

How much more interest earned on top rate (1.25%)

 

Access

 

 

£5,000

£10,000

£5,000

£10,000

Barclays Everyday Saver

0.05%

£2.50

£5

£60

£120

Branch, online and phone

HSBC Flexible Saver

0.01%

£0.50

£1

£62

£124

Branch, online and phone

Lloyds Easy Saver

0.1%

£5

£10

£57.50

£115

Branch, online and phone

NatWest Instant Saver

0.01%

£0.50

£1

£62

£125

Branch, online and phone

Santander Everyday Saver

0.1%

£5

£10

£57.50

£115

Online only

Moneywise Best Buy - Ulster Bank eSaver

1.25%

£62.50

£125

 

 

Online only

Source: Savings Champion, 14 September 2017

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