Savers have paid a heavy price over the past 14 years as various Governments have sought to rescue the country from financial and economic crises brought about by corporate greed and, of course, coronavirus – the scourge that refuses to go away.
To borrow a popular idiom, savers have suffered the equivalent of death by a thousand cuts, their income payments savaged as the Bank of England (encouraged by Governments red, blue and in between) has taken an axe to interest rates to safeguard the economy.
But maybe (a big maybe), the tide is about to turn for the country’s army of downtrodden savers.
Further ‘modest’ increases in the base rate are likely in the new year, but will banks follow?
Savers that embrace all ages –ranging from the young, keen to put together a deposit for a new home, through to the elderly, who depend upon their cash savings to top up their retirement income.
Last week, the Bank of England did what we thought it would do four weeks ago and pushed up the base rate, from 0.1 per cent to 0.25 per cent.
Further ‘modest’ increases are likely in the months ahead as Threadneedle Street attempts to bring inflation – currently roaring away like a Christmas log fire at 5.1 per cent – under control.
We’ve been here before in the past 14 years – for example, the two rate rises of late 2017 and August 2018 – only to see interest rates come crashing down again as a result of another financial emergency.
So savers mustn’t get too carried away into believing that last week’s increase marks a guaranteed glorious new dawn. But there is a shaft of light at the end of a dark tunnel.
Irrespective of how quickly the base rate rises in the coming months, what is essential is that in the coming days, the country’s leading banks – which we bailed out in 2008 – play fair by savers.
This is why, today, we are launching our ‘Give savers a rate rise’ campaign.
Our four crucial demands are straightforward:
● There can be no procrastination when it comes to banks passing on the rise in the base rate to savers with variable interest paying accounts. Indeed, increases should all be backdated to December 16.
● The full 0.15 percentage point increase should be passed on to savers by the major banks. Indeed, nothing less and in instances where rates on specific accounts have already been cut to the bone, something more on top of the 0.15 percentage increase in the base rate.
● All savers should be notified of the increases in writing – and be clearly told about any similar accounts that offer a more compelling rate of interest.
● Savers should also be informed that it might pay them to shop around for a better rate offered by a rival bank or building society. We’re not lone wolves in calling for a fairer deal for savers. A number of former Government Ministers, including Vince Cable, Steve Webb and Ros Altmann, are all backing our campaign – as are advocates championing the best interests of pensioners (see below).
Do you think your bank is giving you a raw deal on savings? Email firstname.lastname@example.org
One of those advocates is Anna Bowes, co-founder of the rate scrutineer Savings Champion. In an impassioned plea she calls for banks ‘to do the right thing’ and support savers.
Dennis Reed, a director of pensioner pressure group Silver Voices, accuses the banks of ‘making a mint out of savers for years’.
Meanwhile the former Pensions Minister Ros Altmann says that at the very least the banks should pass on the full 0.15 percentage point increase in the base rate to ‘long-suffering savers’. Absolutely.
Steve Webb, a Pensions Minister in David Cameron’s Coalition Government, says savers ‘have faced a hostile environment for most of the past decade and it’s time they were given a break’. Again, spot on.
Although it is early days, the omens (sadly) do not look good. The banks appear to be very much in parsimonious mood – Scrooge-like.
On Friday, The Mail on Sunday asked all of the country’s biggest banks – Barclays, HSBC, Lloyds, NatWest and Santander – when they would be pushing up savings rates. We also asked them by how much and when.
A shameful lack of interest… the banks’ response
‘Interest rates on our savings accounts are not directly linked to the Bank of England base rate so there is no immediate or automatic increase in interest rate. However, a review will be carried out on our accounts and if there are any changes to interest rates, we will notify customers directly.’
‘We are considering what impact the Bank of England’s announcement will have for borrowers and savers. We will announce details in due course.’
‘We are reviewing what this means for savings customers. Any changes will come into effect on February 1.’
‘We are reviewing our savings rates and will provide more information in due course.’
‘Any future changes to Santander’s range of variable rate banking and savings products will be communicated to customers.’
‘We keep our variable rate [savings] products under continual review.’
OUR FOUR DEMANDS
1. Give full 0.15 per cent boost to ALL savers
2. Backdate extra interest to December 16
3. Notify savers of changes in writing
4. Tell savers of any better deals on offer
Their individual responses are reported above, but they do not make for good reading if you’re a saver. Lloyds, owner of a number of major savings brands (Halifax, Birmingham Midshires and Bank of Scotland), says savers will have to wait until February before they feel any benefit of last week’s base rate rise.
Although it says mortgage rates on Lloyds and Halifax branded standard variable rate loans are rising by 0.15 percentage points from February, it is refusing to show its hand with regards to savings rates. Others say they are reviewing what to do – code for procrastination.
Savings Champion’s Bowes is not surprised. She has trawled through the savings data she has meticulously kept on all the providers – and the results suggest the banks will do everything possible not to give savers the rate rise they deserve.
For example, when the base rate rose in November 2017 from 0.25 to 0.5 per cent, Bowes says less than half of variable rate savings accounts saw any increase in interest rates.
The average rate paid on an easy access savings account rose by a pitiful 0.06 percentage points.
The way some savers have been treated is nothing short of outrageous.
Take for example HSBC Flexible Saver, an account that in the bank’s own words ‘helps you save for anything, in a way that suits you – a wedding, a new car, a once-in-a-lifetime holiday or maybe all three’.
In July 2016, when the base rate was 0.5 per cent, it was paying savers 0.05 per cent interest on all balances – 50p a year for every £1,000 squirreled away.
Today, it is paying just 0.01 per cent, a miserly 10p per £1,000 saved. Bowes describes the current rate as ‘poor’ – far too kind a word, ‘Mean’ or ‘miserly’ are more suitable descriptions.
While HSBC mulls over how to respond to Thursday’s rate rise, it means someone with a Flexible Saver account is currently receiving a rate 80 per cent less than they were getting back in July 2016.
Over the same period, the base rate has halved. The rate on the Flexible Saver account should now be pushed up to at least 0.16 per cent.
On Friday, all HSBC would tell me was that ‘if there are any changes to interest rates, we will notify customers directly’. Thank you, but not good enough.
As for the other banks, not one offered a glimmer of hope for savers. I will let you judge how saver-friendly their responses are.
To all of the banks, we say: ‘Give savers a rate rise. Now.’
All the financial heavyweights back our major new campaign
Ros Altmann, ex-Pensions Minister
Clearly, at 0.25 per cent, the Bank of England’s interest rate is way below inflation. Savers are seeing the real value of their money whittled away each month as prices rise but interest rates stay so low.
Now that banks will see higher interest on the money they deposit with the Bank of England, I would hope that at the very least they will pass all of that increase on to poor, long-suffering savers, who are so worried that their savings are buying less and less.
Inflation erodes savers’ confidence and every economy needs people to be saving, especially as the economic outlook remains so uncertain. It is time for banks to help their savers enjoy the tiny bit of better news that this rate rise could represent.
Steve Webb, former Pensions Minister
The banks are quick to pass on an increase in the base rate to borrowers. But we need to see the banks be just as fast in providing customers with higher savings rates. Britain’s savers have faced a hostile environment for most of the past decade and it’s time they were given a break.
Vince Cable, former Business Secretary
With inflation rising, it is essential that savers are not penalised by banks holding down interest rates when the base rate rises.
There is still insufficient competition in the marketplace for savings deposits. As a result, the banks will be tempted to revert to their old cartel way of behaving. Savers must be respected.
Dennis Reed, director at Silver Voices
The banks have been making a mint out of savers for years.
With inflation at 5.1 per cent and rising, and the state pension only due to increase by 3.1 per cent, older people need more of a boost than the few extra pounds from savings that this rate rise will produce.
Anna Bowes, co-founder of Savings Champion
We have just celebrated our tenth anniversary at Savings Champion. Thoughout that time, savers have been getting a raw deal.
So I am delighted that at last the Bank of England has seen sense and increased interest rates.
Anna Bowes, co-founder of Savings Champion
But I fear savers are still not going to get the fair treatment they deserve. This is especially true of savers with big high street banks, many of whom wrongly assume their bank is doing its best for them.
When the interest those loyal savers are earning is as low as 0.01 per cent a year – yes, 0.01 per cent – my view is that they are being robbed. To put this derisory rate into pounds and pence, on a deposit of £10,000, that means annual income of just £1. You can’t even buy a bad cup of coffee with that.
Even in the unlikely event that these providers were to pass on the full 0.15 percentage point increase, that same £10,000 savings pot would still earn only £16 in annual interest. While I implore banks to do the right thing and react positively to The Mail on Sunday’s splendid ‘Give savers a rate rise campaign’, I am pretty sure they won’t – though I would love to be proved wrong.
With inflation soaring, savers now need all the help that they can get.
If you leave money sitting in an account paying 0.01 per cent annual interest with inflation at 5.1 per cent, your money will halve in real terms in just 14 years. That’s a terrifying financial fact.
So come on banks, make me a liar! Do the right thing and support your savers. Give savers a rate rise.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.