Why that financial institution jargon may very well be hiding a price rip-off: SYLVIA MORRIS

On Sep 25, 2024

Updated: 22:28, 24 September 2024

Are you happy earning between 1.2 per cent and 1.75 per cent on your savings? I certainly wouldn’t be when prices are rising by 2.2 per cent a year.

But these are the rates that you earn if you leave your money in the standard easy-access account with the big High Street bank that runs your current account.

You may not even realise you’re getting a poor rate and could switch to a better deal thanks to the ‘confusing’ jargon-riddled letters sent by banks.

Rotten rates: Standard easy-access current accounts with big High Street banks pay between 1.2% and 1.75%

The watchdog warned last week banks are sending us more emails and letters about our savings, but, they are often ‘overloaded with generic information’ and do not tell you what rate you receive.

The Financial Conduct Authority (FCA) has told them to clean up their act.

If you’ve thrown your money in one of these duff accounts it means you’re losing purchasing power. And things are not going to get any better – they are getting worse.

The powerful Treasury Select Committee and the FCA have both had a go at the big banks for paying abominable rates on savings accounts in the past 18 months.

Last week, the FCA finally published its long-awaited update on the Cash Savings Market Review which it initiated last year. What a disappointing read it is.

Now there’s just one 5% fixed bond

Fixed-rate bonds are on the move again – and the top rates are disappearing fast.

Just one bank now pays 5 per cent over one year, UMTB, which is available through savings platform Raisin.co.uk.

Ford Money chopped its one-year rate from 4.85 per cent to 4.6 per cent last week, while Atom fell from 4.85 per cent to 4.7 per cent.

On Monday, SmartSave cut its rate to 4.76 per cent. It paid 4.93 per cent at the start of this month.

The falls make National Savings & Investments’ rate of 4.75 per cent on its one-year Guaranteed Growth Bond look increasingly attractive. If you want monthly income, the bond pays 4.65 per cent.

The one-year version is available to those who already hold NS&I’s Guaranteed Growth Bonds or Guaranteed Income Bonds which are coming up to maturity and want to reinvest.

Last July, the watchdog started delving into the awful rates offered by some banks and building societies, naming and shaming the worst, and told them to do better.

As a result of its latest probe, it crows that the average savings rate on easy-access accounts has risen from 1.66 per cent in July 2023 to 2.11 per cent in June this year, dishing out an extra £4 billion in interest.

The good news is the rates have increased by more than the Bank of England base rate hike – which is up by 0.25 percentage points over the same period of time.

But this is not good enough when the cost of living is rising faster.

Inflation hit 2.2 per cent in the year to August and is eating away at your savings in these accounts, even after you have been paid interest.

All the big banks, which hold the bulk of our easy-access money, pay even less and are still getting away with it.

There are 277 easy-access accounts that beat inflation’s 2.2 per cent, say data scrutineers MoneyfactsCompare.

The top-paying accounts include Ford Money Flexible Saver and Dudley BS Easy Access Saver Online at 4.75 per cent, along with Close Brothers Easy Access and Secure Trust Access at 4.7 per cent.

[email protected]

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.