Many personal and business bank account holders are in for disappointment soon. Many of the top paying savings accounts across the UK are dropping their interest rates significantly, some to as little as after-tax rates of 0.08 per cent.
This past January, building societies and banks launched a series of new savings products in a bit to attract savers. However many of these accounts had temporary bonus rates that are now set to expire at the end of the year. Many banks are gambling that their savers will stick with their products even after the rate drops significantly in the new year.
A portion of these savings providers will inform their customers by post of the new rates. In these cases, notices will be mailed out at least 14 days before the rate drop. Many banks do not, however; both Santander and Lloyds TSB will not be informing their customers on the incipient rate drops.
All the offerings from both banks were paying top rates starting last January. Moreover savers are sometimes hard-pressed to discover what they’re earning. This is due to no requirement on banks’ part to include the interest rate on savers’ bank statements.
Savers stand to lose big by neglecting to switch their accounts after the rate drop. For every £10,000 sitting in these low-rate accounts, before-tax interest losses can be as much as £180. However savers who do switch can see annual interest gains of as much as £290.
The AA, where the deposit taker is Halifax, launched its AA Internet Extra Issue 2 in January. It paid 2.4% after tax (3% before tax), one of the top rates around at the time.
In some cases the removal of the bonus rate on the savings account can result in dramatic losses. This is the case with the Easy Saver account from Lloyds TSB and the Instant Saver from the Post Office. Both banking providers are eliminating their bonus rates completely. This leaves savers with a paltry 0.08 per cent interest rate for both financial service providers.
Other High Street accounts that paid top rates, thanks to a bonus, at the start of this year include Lloyds TSB Easy Saver, Santander Instant Access 3 and Post Office Instant Saver.
The Lloyds TSB and Post Office rate plummet to 0.08% (0.1%) after a year, while Santander’s drops to 0.8% (1%).