The vast majority of savings accounts pay only a fraction of today’s inflation rate of seven percent. Incredibly, savers have £285 billion sitting in accounts that pay NO interest at all.
As Victoria Scholar, head of investment at Interactive Investor, points out, this is destroying the spending power of money left on deposit. At that rate, £10,000 will be worth £700 less in real terms after just one year.
You can get a bit more interest if you hunt around for it. Today’s market leading easy access savings account, Chase from JP Morgan, pays 1.5 percent, double the Bank of England base rate of 0.75 percent.
The newly launched Santander 123 Regular e-Saver account pays 2.5 per cent, as does Nationwide’s Flex Regular Saver.
The NatWest Digital Regular Saver goes a step further, paying 3.25 percent.
Yet when you look at the small print, they aren’t half as attractive as they seem. Some of the best deals are restricted to existing customers.
Another trick is to only pay that eye-catching headline rate on a tiny amount of money.
As an example, the NatWest Digital Regular Saver will only pay 3.25 percent on the first £1,000 in your account.
Also, the maximum deposit is limited to just £150 a month. A saver who paid in the maximum monthly amount for a year would put away £1,800 in total.
They would earn £25.58 in interest as a reward for their efforts. And that’s that.
Frankly, it’s pathetic.
The Santander and Nationwide accounts both have similar restrictions, so the maximum a saver can get over the 12-month term is £32.26 and £32.50 respectively.
Taking out those accounts seems like an awful lot of trouble, for very little in return.
It’s a long-running scandal, and it’s getting worse.
READ MORE: This savings account beats Santander 123 by paying 3.25%
I’ve written hundreds of articles urging savers to shop around for a better rate. Yet most of us have better things to do in life than spend our time chasing a few extra basis points on our savings.
The young and hungry “challenger” banks may offer today’s best returns rates, but they are playing the same game.
They are looking to build market share but once they establish themselves, rates typically go into a long, slow decline.
The Bank of England should also hang its head. It abandoned savers after the financial crisis, and has pointedly refused to run to their rescue.
If the BoE really been worried about the impact of resurgent inflation on savers, it would have started hiking rates last year.
Instead, it dithered. Now look at the mess we are in.
As inflation heads towards 10 percent, savers are stuck. They deserve better than being tricked into believing today’s savings rates are generous, when they’re still the same old rip-off.