- Over a third of all saving accounts reduced rates for existing customers, with average reduction of 0.46 per cent
- Loyal savers lose out on £4.7 billion in interest
- Banks not obliged to tell customers about rate reductions up to 0.5 per cent per year
Thousands of loyal UK savers are losing out at the expense of new customers, according to new analysis released today from Metro Bank.
Independent research conducted by Savings Champion, on behalf of Metro Bank, analysed savings accounts from 10 leading high street providers over the last three years. The research found that 43 per cent of accounts currently pay less to existing customers than the equivalent live rate offered to new savers.+
Craig Donaldson, Chief Executive Officer at Metro Bank, said: “Our research reveals a widespread practice among many banks of cutting rates on savings accounts for existing customers below the rates paid to new customers. These cuts are often used to subsidise new higher rate accounts in a bid to entice new savers, regardless of the fact that existing loyal customers are losing out. No loyal saver should be penalised in this way.”
The research also found that all of the 10 providers analysed had cut rates for their existing customers in the last three years. Out of 456 savings accounts reviewed, over a third (35 per cent) reduced rates (outside of bonus rates expiring), by an average of 0.46 per cent; meaning a total loss of nearly £4.7 billion for UK savers.*
Nearly half of these cuts (45 per cent)+ were 0.25 per cent or less, meaning under current FCA rules, the providers would not have had to inform their customers of the rate reduction.**
Donaldson continued: “Providers do not have to inform existing customers if rates are cut by 0.25 per cent in one go, to a total of 0.5 per cent a year. We believe banks should be forced to let customers know personally about every rate change, and at the same time, inform customers of any better suited products available to them. As an industry we must improve relationships between banks and consumers - transparency is something that must be encouraged and supported by the FCA.”
Santander’s customers saw the highest cuts in their rates; with an overall average reduction for existing customers of 0.69 per cent. Its largest cut was 1.86 per cent which it deducted from its eSaver Issue 5 (previously Alliance & Leicester), leaving existing customers with a rate of 0.50 per cent.***
Susan Hannums, Director at Independent Savings Advice site Savingschampion.co.uk said: “Many well-known providers have been taking full advantage of savers’ inertia. Savers should be able to trust their bank not to cut their rates at the expense of new customers. As thousands of existing savers have seen their rates reduced in recent years, many plummeting to record low levels, more needs to be done to improve the desire and confidence to save.”
Accounts included: Easy Access Savings Accounts and Instant Access ISAs.
+Competitor analysis available upon request
*According to the Bank of England there is over £1 trillion in savings (£1,013,938,000,000) as at November 2014 (updated 2 January 2015). So using the average figure of 0.46%, this equates to a loss of £4.7 billion in interest (£4,664,114,800) due to rate reductions