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AUDIO: How FLS has devastated savings rates

AUDIO: How FLS has devastated savings rates

Category: Savings

Updated: 30/08/2013
First Published: 30/08/2013

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Sylvia Waycot, editor of, explains to BBC Radio 4 Moneybox's Paul Lewis why the Government's Funding for Lending Scheme has had such a devastating impact on savings rates.

Sylvia highlights why banks and building societies no longer want to be at the top of the savings best buy tables.


Paul Lewis: If you're a saver, perhaps you have a weekend ritual: Cup of tea and the weekend papers. Flip to the money section and check out the best buy tables. Oh. If you do, you kind of fail to notice that this is perhaps one of the worst times in the whole history of ever to be a saver. In this series, we're looking at how you, we, all of us pay for the city and these pitiful rates here in black and white are another cost that savers are paying. Sylvia Waycot of Moneyfacts, which compiles the best buy tables, says that banks are competing with each other to offer the worst rates for savers.

Sylvia Waycot: It's been quite strange. We've had a history of 25 years at Moneyfacts where all of the providers have constantly been trying to get to the top of the savings and they'd ring up and say: "Oh, where's the top. Who's the top?" Really, really excited. Really anxious. They would design products to make sure they were at the top. And, for the first time ever, we have people not wanting to be at the top. They don't want to be in the chart.

PL: Why wouldn't they want to be in the chart?

SW: They don't want to be in the best buy chart because they don't want to be offering the best rates. They want to be offering more conservative rate, so they lower their rates. Some banks' strategy is to be consistently good, so they don't want to be at the top or the bottom. They want to be in the middle because then they can market the fact that they're always going to be okay. But they would find, suddenly, they're at the top of the charts, not in the middle. And so they would have to lower their rates to get to the middle of the chart. And so it goes on and on in a downward spiral rather than in the traditional saving spiral which was upwards.

PL: So, the banks are paying dreadful rates because they don't want your money. What sort of weird world is this? The reason, says Sylvia, is that the Government now guarantees banks cheap funds through a scheme called "Funding For Lending".

SW: Because the Government's come in and said: "Borrow from us at a really cheap rate", the banks have certainly said: "We don't need service money anymore, thanks very much." And so savers' rates on all of the accounts have absolutely plummeted. The average for a no-notice account is 0.71%, which is lower than inflation. And then, if you're a taxpayer, you'd be sharing that with the taxman as well. So, really quite rubbish rates, actually.

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