The vast majority of savings accounts pay only a fraction of the current inflation rate of seven percent. Incredibly, savers have £285billion in accounts that pay NO interest.
As Victoria Scholar, Head of Investments at Interactive Investor points out, this destroys the purchasing power of money left on deposit. At this rate, £10,000 will be worth £700 less in real terms after just one year.
You may get a bit more interest if you seek it out. JP Morgan’s Chase, today’s market-leading easy-to-access savings account, pays 1.5%, double the Bank of England base rate of 0.75%.
The new Santander 123 Regular e-Saver account pays 2.5%, as does Nationwide’s Flex Regular Saver.
The NatWest Digital Regular Saver goes even further by paying 3.25%.
Yet when you look at the fine print, it’s not half as appealing as it looks. Some of the best deals are for existing customers only.
Another tip is to only pay this eye-catching rate on a small amount of money.
For example, the NatWest Digital Regular Saver will only pay 3.25% on the first £1,000 in your account.
Additionally, the maximum deposit is limited to just £150 per month. A saver who paid the maximum monthly amount for a year would set aside £1,800 in total.
They would earn £25.58 in interest as a reward for their efforts. And that’s it.
Frankly, it’s pathetic.
Santander and Nationwide accounts both have similar restrictions, so the maximum a saver can get over the 12 month period is £32.26 and £32.50 respectively.
Deleting these accounts seems like a huge hassle, for very little in return.
It’s a long-running and growing scandal.
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. Still, most of us have better things to do in life than spend our time chasing a few extra basis points on our savings.
Young and hungry challenger banks may offer today’s best rates of return, but they are playing the same game.
They are looking to grow their market share, but once they are established, rates usually go on a long, slow decline.
The Bank of England should also lower its head. She abandoned savers after the financial crisis and ostensibly refused to come to their aid.
If the BoE had been really worried about the impact of the resurgence of inflation on savers, it would have started raising rates last year.
Instead, he hesitated. Now look what a mess we are in.
As inflation heads towards 10%, savers are stuck. They deserve better than to be tricked into thinking that today’s savings rates are generous, when they are still the same old scam.