UK building societies and banks have begun their attempts to entice savers with new savings accounts which require a four month waiting period before relinquishing any funds deposited into them.
However, these accounts offer the same interest rates as accounts without such restrictions, therefore leaving many savers wondering why financial institutions would begin rolling out these so-called “notice accounts” once more.
Banks say the launch of these older-fashioned accounts is an effort to attract funds that will remain deposited for longer lengths of time instead of having their customers jump ship at the first sign of a higher rate being offered elsewhere.
Many industry experts have cautioned savers to simply hang on to their current savings product instead of having to face the sometimes overly complicated conditions and terms on notice accounts.
One example of a newly launched notice account, a cash ISA from Northern Rock that pays at a tax-free rate of 2.8 per cent, restricts any withdrawals except in the case of 120 days’ notice. Additionally, after the first 12 months, the interest rate drops by over half to 1.3 per cent.
A new taxable issue account from the Manchester Building Society only requires 45 days of notice before making a withdrawal. However savers are limited to four such withdrawals in any 12 month period. In a move that many savers have described as “adding insult to injury” the total after tax payout is only 2.09 per cent.
Another example, a postal account from Dunfermline Building Society, requires a notification of 60 days before authorising a withdrawal. Including the accounts 0.8 per cent bonus for its first year, the financial product pays only 2.16 per cent after taxes. Worse yet is the stipulation that savers lose their bonus if they go over four withdrawals in one 12 month period.
In comparison, traditional “easy access” accounts have competitive rates but no waiting period before being able to make a withdrawal. One example is a Santander ISA that pays a rate of 2.85 per cent inclusive of bonuses, which actually outstrips the Northern Rock offering by one half of a percentage point.