Savers Are Sleepwalking Into Low Interest Rates | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 15/05/2020

Savers are losing out on earning higher interest rates by neglecting to switch accounts when a short-term bonus has ended, research released by Investec Bank reveals.

The research found that between 2016 and 2019, 66% of people with cash savings opened accounts paying short-term bonuses. Of these, less than half (42%) moved the money once the bonuses had expired, while one in four (25%) left some of their savings there.

Meanwhile, 22% of savers left all the money in these accounts after the bonuses expired.
Commenting on the research, Linda Brown, head of savings at Investec Bank, said: “Our findings reveal that around 17% of best-buy savings accounts last year included a short-term bonus, so it is important for savers choosing these to be aware when the bonuses expire and ensure they are happy with their new rate of interest.

“There are lots of changes taking place in the retail savings market and people need to keep a close eye on the interest rates they are receiving and be comfortable with them being competitive and fair.”

What is the easy access account rate when the bonus is removed?

Our research into bonus rate accounts found that on 14 May 2020 there were nine easy access accounts available that offered a bonus rate. Of these, five offered rates above the average easy access interest rate of 0.33% when the bonus was included but, as the table below shows, just two pay above the average rate when the bonus rate is removed.

In fact, our research found that the average rate of the top nine highest paying easy access accounts that include a bonus was 0.64% gross, but the average rate for these accounts excluding the bonus was just 0.28% gross - this is a drop of 0.36% gross when the bonus is removed.

Provider Account AER (including bonus) AER when bonus is removed
SAGA Saga Easy Access Savings Account 1.00% (0.20% bonus for 12 months) 0.80%
AA Easy Saver – Issue 15 0.75% (0.65% bonus for 12 months) 0.10%
Post Office Money® Instant Saver (Issue 12) 0.75% (0.65% bonus for 12 months) 0.10%
Tesco Bank Internet Saver 0.65% (0.30% bonus for 12 months) 0.35%
Post Office Money® Online Saver Issue 48 (yearly option) 0.50% (0.49% bonus for 12 months) 0.01%

It is clear from our research that savers with an easy access account where the bonus has ended should consider switching accounts or they could find themselves being paid a significantly lower interest rate. As well as this, when taking out an easy access account with a bonus, savers should be vigilant to when the bonus rate ends and ensure that they check the easy access saving charts to see if there is a more competitive rate available.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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