My wife recently opened an account with Shawbrook Bank. The account is a 120 day notice account with variable interest at 1.08 per cent.
We are on its issue 50. It has since launched an issue 51 for the same 120 day notice paying 1.15 per cent. It told my wife that she will have to give 120 days notice and open a new 51 issue account to get this slightly increased rate.
If issue 50 is a variable rate, why is it not increasing it now? I can almost guarantee that if the rate went down it would reduce the rate on issue 50 immediately.
We’re deeply unhappy and as a consequence we have given them 120 days notice and will invest the money elsewhere. Via email
Banks and building societies often launch new savings rates under new issue numbers meaning existing savers remain on the rate of a previous issue number.
Ed Magnus of This is Money replies: Currently, savings rates are starting to inch up. That means if you lock away money in a fix, you’ll be stuck with that rate and a higher issue may appear, especially after three base rate rises.
However, while this is a notice account, it comes with a variable rate label and it has left you frustrated.
I can see why Brentwood-based Shawbrook’s decision to keep their variable rate the same while launching an improved version of the same 120 day notice account would irk you.
Not all banks and building societies use this method to launch and close their savings products.
Some savings providers such as Ford Money and RCI Bank only offer one variant of their accounts so they just change the rate for all.
However, separating new and old accounts using issue numbers is fairly common practice.
What is a notice account?
Notice accounts are essentially a halfway house for those fed-up with the lower returns of easy-access rates but wary of locking their money away for a fixed amount of time.
The notice period will differ depending on the account you choose. It can typically vary from anywhere between 14 and 200 days.
When savers want to withdraw cash they will just have to give notice and wait the allotted number of days.
Although notice accounts are more flexible than a fixed rate deals, the notice period means they are not suitable for people who want to access their funds at any time.
In these circumstances an easy access account would be more suitable.
Looking at the top 10 highest paying notice accounts currently available, seven have a specific issue number. Only QIB UK, Investec and UBL don’t have one.
If there is one silver lining, it is that your current rate is at least competitive.
But saying that, Zopa Bank has just launched a 31 day notice account paying 1.15 per cent and a 95 day notice account paying 1.25 per cent.
Aldermore is also offering a 120 day account paying 1.2 per cent.
United Trust Bank is also offering a 1.3 per cent rate, albeit for a 200 day notice period.
QIB (UK) and UBL UK are offering 95 day accounts paying 1.15 per cent and 1.1 per cent respectively, available through the savings platform, Raisin, which could also net savers a £30 bonus if they deposit £10,000 of more.
However, you may end up being glad you’ve given notice to Shawbrook Bank.
Savings rates are on the up, following the Bank of England’s quickfire base rate rises over the past three months – from 0.1 per cent to 0.75 per cent.
For example, the best paying easy access deal paid 0.71 per cent in December. The best deal now pays 1 per cent.
The best one year and two year fixed rate deals paid 1.41 per cent and 1.61 per cent in December. Now the best deals pay 1.85 per cent and 2.1 per cent respectively.
With inflation expected to rise even higher over the coming months, the Bank of England is expected to announce further base rate rises in response, with many believing savings rates will continue to nudge higher throughout this year.
It would therefore be wise for anyone with either an easy access or notice account to consider switching to take advantage of these better rates – just like our reader has done.
To help in answering our reader’s question, we spoke to Alun Williams, commercial director of savings at Shawbrook Bank and James Blower, founder of the Savings Guru.
Shawbrook Bank’s response?
Alun Williams replies: We are sorry to hear about this customer’s frustration.
The 120 Day notice savings accounts are variable rates but they do not track the Bank of England base rate.
The rates are variable as we have the option to move them both up or down.
For reductions, we provide 120 days plus 14 days’ notice as a minimum. For increases, we notify as soon as possible.
We frequently review our products and the rates we offer, with higher rates usually available to customers who are happy to accept some limited restrictions – such as giving notice or having no access for a fixed period.
Is this common practice amongst savings providers?
James Blower replies: This is a very common issue. The vast majority of new entrants and many building societies use issue numbers to launch and close new notice accounts.
Some challenger banks separate new and existing customers to limit inflows – so you’ll often see that they’ve restricted accounts to existing customers only to calm demand.
The big banks often use new variants. They’ll typically launch a new account with a new name, instead of ‘issue 2’ to get round it.
So for example, a bank have the ‘ABC 30 Day Notice’ and then launch the ‘XYZ 30 Day Notice’ to pay a different rate.
Although they may be both 30 day notice accounts, doing it this way makes the latter a ‘new’ account and means they can pay a better rate on this.
What’s your advice to our reader?
James Blower replies: We deal with lots of poor practice from banks where readers are disadvantaged, but on this occasion, this isn’t one.
Until recently, interest rates in the savings market have been largely falling for several years.
During this time, the vast majority of providers, in my experience, have been very generous with notice account customers.
They have often been slow to cut rates and, when making reductions, have often reduced rates to levels which can’t be beaten by any on sale product of their own and indeed in the market generally i.e. notice savers have done incredibly well in a falling market.
While I can appreciate the frustration of seeing a slightly better rate, soon after your reader has opened their account, their current rate is only beaten by a few providers so it is still extremely competitive.
They are also going to find the same issue with other notice providers potentially.
My advice to them is to either stick with it or, when the notice period is served, put the money in easy access accounts as they are highly likely to encounter the same issue with other providers.
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