Consumer group Which? has carried out a survey into Britain’s bank accounts and found that more than 20 per cent of all savings accounts on offer are paying a paltry interest rate of 0.1 per cent or even less, despite the base rate being held by the Bank of England for more than three years.
These rates mean that millions of savers are earning almost nothing on their accounts; a person with £5000 in savings would be earning less than £5 per year in interest.
The survey found that the number of these low interest paying accounts on offer has increased by 25 per cent in the past year, and that banks were commonly offering higher rates to new customers at the expense of their existing ones. The majority of low interest rates were on ‘superseded’ account types which are no longer open to new customers.
“Banks and Building Societies are not being upfront about poor returns and making little effort to inform customers about rates on offer” said a Which? spokesperson, calling on banks to simplify the complex range of financial products they have on offer. “Such a complex range of savings and accounts is designed to exploit consumer inertia and prompt confusion rather than as a genuine response to consumer need.”
Angela Knight, Chief Executive of the British Bankers Association defended the current range of savings options on offer: “Banks are open about what they pay. The information is in branches, on statements and extensively covered in newspaper ‘best buy’ columns and comparison sites.”
Knight was also keen to point out that while savers may be losing out because of poor interest rates, borrowers were seeing the benefits. “Most people are borrowers and the current low interest environment is benefiting mortgage customers, people with loans and businesses.”
The base interest rate has been at a historic low of 0.5 per cent since being cut by the Bank of England in March 2009..