United Kingdom

Latest rate cuts will leave many savers earning next to nothing

Thousands of savers with big banks will soon be earning next to nothing on their nest-eggs following another round of rate cuts.

Some are now in line to earn as little as 0.01 per cent — just £1 interest over a whole year on each £10,000 in their account.

This is £129 less than if they switched to a top easy-access deal elsewhere.

Some are now in line to earn as little as 0.01 per cent — just £1 interest over a whole year on each £10,000 in their account - following another round of rate cuts

Big banks began announcing new rates after the 0.65 percentage point fall in Bank of England base rate to 0.1 per cent last month.

And as they focus on helping borrowers through the coronavirus chaos, it means savers are once again out in the cold. Even accounts for children are being hit hard.

Many big banks already pay lowly savings rates of as little as 0.1 per cent and 0.25 per cent.

At this level they can’t pass on last month’s full fall in base rate from 0.75 per cent to 0.1 per cent. Even so, they are still cutting rates to the bone to pay as little at 0.01 per cent.

Every 0.1 percentage point cut they can squeeze out, cuts the interest they have to pay savers by £647 million a year. Big banks hold a huge £647 billion of our money in their ordinary easy-access accounts.

Lloyds, Halifax, Barclays, HSBC and TSB all plan to pay or are already paying 0.01 per cent.

Halifax cut the rate on its easy-access Everyday Saver to 0.01 per cent just six days after base rate fell to 0.1 per cent on March 19. Lloyds Bank Easy Saver is also down to this bare minimum.

Barclays Everyday Saver goes down to 0.01 per cent at the end of July. Until then savers will continue earning 0.25 per cent or 0.3 per cent, depending on their balance.

HSBC Flexible Saver account falls to 0.01 per cent from mid-June. TSB eSaver and Easy Saver join them from the start of July.

NatWest and RBS have been quick off the mark. Their Instant Saver account drops to 0.01 per cent on April 20.

HSBC Future Saver for Children goes down 0.5 percentage points to 0.25 per cent on June 17. TSB Junior Isa is down by the full 0.65 percentage points but is still 2.6 per cent.

Some providers are up to their old tricks of paying higher rates to new savers while their loyal savers lose out.

Co-op Bank pays 0.55 per cent on its Britannia Select Access Saver Issue 13, which is currently on sale to savers happy to restrict the number of withdrawals they make each year to just four. 

But loyal savers in earlier issues 1 to 6 will see their rate cut to 0.1 per cent in June, down from the current 0.7 per cent.

And the Post Office pays 1 per cent to new savers in its Online Saver. But those who have had an account for 12 months earn a quarter of that at 0.25 per cent.

Savers can earn better rates by switching from big traditional banks. Marcus by Goldman Sachs pays 1.3 per cent on its Online Saver account. 

That means £130 interest a year on £10,000 instead of £1. Even if Goldman Sachs slashes its rate to reflect the full base rate fall, it will still pay 0.65 per cent — or £65 interest.

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