At the start of May 2012, the Nat-West increased mortgage repayments, despite Bank of England rates remaining stuck at their lowest-ever level: 0.5%. At the same time, the Nat-West and other banks have been slashing interest for savers. In fact, new research shows that those with savings accounts and ISAs are losing out on an incredible £13billion each year. Martin Lewis reports.
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He needs no introduction, but Martin Lewis does have bags of savings advice. Martin explains: "the fact is that in this day and age you can't just put your money in the bank, leave it sitting there and expect to earn a decent interest rate. The only way to do it is to become an aggressive saver."
But, before you can do that, you need to find out what rate you're on, and with so many different accounts and interest rates, it's not always that easy. Martin Lewis was on hand to offer up advice to some Watchdog viewers.
Case 1 is inventor and entrepreneur Mark Searles. He's currently designing a new product to provide power assistance to bicycles. In 2001 Mark invested his money in an online 'e-savings' account with Nationwide. That gave him around 5% interest - a healthy £6000 per year. But in the tax year ending 2010 that dropped to just £600 - and he's only just found out about the reduced rate. He was sent messages over a period of two to three weeks and it took a total of two weeks before he received the interest breakdown. That breakdown revealed that his interest had gone from around 5% to just 0.45% per year.
Mark explains: "I trusted Nationwide as the largest building society to keep the rate competitive and also to keep me informed. Nationwide effectively earned an income lending out £180,000 of my money, whilst paying me almost nothing in return."
Martin Lewis explains that banks make it difficult for us to find out what we are actually earning. "Why isn't it printed on every statement?" Martin asks. "Even on online accounts, many will make you click on a link and then lists a whole range of different accounts - how do you know exactly which one is yours? Well, they won't make it easy because they don't want us to leave. Don't let them off the hook: pick up your phones and ask them. And if it's not good enough, leave."
Case 2 is retired gardening enthusiast David Windebank, who wishes he'd left Lloyds TSB early. He put his money into their 'Reward Savings Account' back in 2001. David found his rate had dropped to just 0.5% and despite investing thousands of pounds over the year, it only earned him £11.40. Lloyds said he could open a "new" account with a bonus rate of 1.6%. Trouble is, that rate lasts just 12 months, after which it plummets to a mere 0.1%. David comments: "I would have thought that loyalty would have counted for something, they would look after my money and give me better interest each time."
Martin explains that David appears to have fallen victim to what he likes to call the 'Suck. Slap. Flog' technique: banks like to such people in with headline rates of interest, then they slap the rate down so we still think that we are earning well, but we aren't and at the same time they flog an altogether new account with a similar sounding name so you may catch it in the best buy tables and thing 'fantastic' but you'd be wrong. Martin's advice? Get them, set them up while the bonus rates are there, then diarise to ditch and switch when it ends.
Cash ISAs are usually seen as a better deal for savers because they provide tax free savings, but they're just as vulnerable to having their interest rates slashed.
Case 3: DIY and car enthusiast Alan Emsley from Cheshire is a loyal customer of Natwest. He had his Natwest ISA for six years, but shortly after paying in this year's maximum allowance, they gave him some very un-helpful news: they were dropping the interest rate from what it was at 3.01% to 2.70% for the year. Alan felt that they should have given notification of change before the new tax year came into play.
Martin explains that whether it's a cash ISA from this year or 10 years ago, never think that when the money is in there, it's a done deal. You have a right to transfer your ISA. Now don't do this by withdrawing the cash because then it's not a cash ISA anymore and you will lose your tax status. What you need to do is find the best paying new provider that accepts transfers and ask them to move the money across for you. Then your cash ISA will be in an account that pays better than your previous one.
So the advice is clear. If your bank or building society has cut the rate on your savings, look for a better deal. Those deals are there to be had.
Nationwide spokesperson said:
Mr Searles has previously complained to the Society and we have written back to him at the time to address his concerns. He has made a number of points to both ourselves and Watchdog, which I will address in turn below.
Mr Searles is unhappy with the rate paid on his savings account during 2009. At the start of 2009 Bank of England Base Rate fell to its current historic low of 0.50%. Interest rates we pay on variable rate savings accounts are related to the Bank of England Base Rate, and we are unable to sustain rates at the previous levels seen when the Bank of England Base Rate was much higher. We need to manage the business in a prudent and sustainable way for all of our members and unfortunately this means that we have had to change savings rates in accordance with reductions in the Bank of England Base Rate.
The nature of online accounts such as e-Savings are that they are opened and managed online. Whilst Mr Searles may not have the time to visit the branch, he is a regular user of the online bank, and therefore can access all savings rates from the site before he signs in. Mr Searles has complained to Watchdog that the interest rates are not indicated clearly online, but as you can see from the link below the link to find savings interest rates is clearly shown on the right hand side of the main savings page on nationwide.co.uk.
http://www.nationwide.co.uk/savings/default.htm
Having said that, we are always looking to improve the service we offer our members and in November 2010, we introduced our 7 Savings Promises, and Promise number 6 states:
"We will contact you every year detailing our range of savings accounts, so you know about any new accounts we have launched. We will send you an annual savings statement showing the rate you are receiving, and we will always have our latest rates available at nationwide.co.uk."
The new statement sent to Mr Searles in November 2011 that clearly indicates the rates he was receiving on all his savings accounts.
In our last letter to Mr Searles dated 27 October 2011, we apologised for the fact that the levels of service he received were not at our usual high standards and as a gesture of goodwill we offered him £75 compensation. Mr Searles has chosen not to accept this compensation. The Society also outlined his rights to contact the Financial Ombudsman Service if he remained unhappy and they would independently investigate his concerns, but no complaint has been received.
A spokesperson for RBS said:
'We're sorry if Mr Emsley feels disappointed regarding the change to his Cash ISA. This product does have a variable interest rate and has remained unaltered since 2009. We regularly review all savings products and occasionally do have to alter the rates offered, however all affected customers are contacted in advance of any changes being made. If Mr Emsley chooses to move his ISA elsewhere he will be able to transfer to another ISA provider without losing the tax-free status. These rate changes were deliberately introduced during the ISA season, precisely so customers were able to look at all ISAs offered when the most competitive rates of the year are available.'
'It's important that customers keep track of their savings. To help do this we've started printing interest rates on paper statements and will be extending this online during 2012. We also have a free savings goal tool which helps customers monitor their funds online, and just last week launched a free budgeting tool allowing customers to easily keep track of their funds. We provide detailed product guides in branches and online, as well as contacting customers every year to invite them in for a personal savings review. We strongly recommend savers take advantage of these tools, to ensure they really are making the most of their money.'
A Lloyds TSB spokesperson said:
Lloyds TSB always encourages its customers to regularly review their savings rates and we are transparent in ensuring customers can easily find their current interest rate by publishing these online and on statements.
We communicate any downward changes in rates as we recognise that savers want to get the best return possible on their money.
Across our range, Lloyds TSB offers competitive products both with and without bonus rates, as there is strong customer demand for bonus accounts. We are upfront about any changes to the rate, and we write to customers at the end of their bonus or fixed period to explain that their rate has changed, so they are always in control.
Martin Lewis' Savings Tips...
In order to see this content you need to have both Javascript enabled and Flash installed. Visit BBC Webwise for full instructions. If you're reading via RSS, you'll need to visit the blog to access this content.
He needs no introduction, but Martin Lewis does have bags of savings advice. Martin explains: "the fact is that in this day and age you can't just put your money in the bank, leave it sitting there and expect to earn a decent interest rate. The only way to do it is to become an aggressive saver."
But, before you can do that, you need to find out what rate you're on, and with so many different accounts and interest rates, it's not always that easy. Martin Lewis was on hand to offer up advice to some Watchdog viewers.
Case 1 is inventor and entrepreneur Mark Searles. He's currently designing a new product to provide power assistance to bicycles. In 2001 Mark invested his money in an online 'e-savings' account with Nationwide. That gave him around 5% interest - a healthy £6000 per year. But in the tax year ending 2010 that dropped to just £600 - and he's only just found out about the reduced rate. He was sent messages over a period of two to three weeks and it took a total of two weeks before he received the interest breakdown. That breakdown revealed that his interest had gone from around 5% to just 0.45% per year.
Mark explains: "I trusted Nationwide as the largest building society to keep the rate competitive and also to keep me informed. Nationwide effectively earned an income lending out £180,000 of my money, whilst paying me almost nothing in return."
Martin Lewis explains that banks make it difficult for us to find out what we are actually earning. "Why isn't it printed on every statement?" Martin asks. "Even on online accounts, many will make you click on a link and then lists a whole range of different accounts - how do you know exactly which one is yours? Well, they won't make it easy because they don't want us to leave. Don't let them off the hook: pick up your phones and ask them. And if it's not good enough, leave."
Case 2 is retired gardening enthusiast David Windebank, who wishes he'd left Lloyds TSB early. He put his money into their 'Reward Savings Account' back in 2001. David found his rate had dropped to just 0.5% and despite investing thousands of pounds over the year, it only earned him £11.40. Lloyds said he could open a "new" account with a bonus rate of 1.6%. Trouble is, that rate lasts just 12 months, after which it plummets to a mere 0.1%. David comments: "I would have thought that loyalty would have counted for something, they would look after my money and give me better interest each time."
Martin explains that David appears to have fallen victim to what he likes to call the 'Suck. Slap. Flog' technique: banks like to such people in with headline rates of interest, then they slap the rate down so we still think that we are earning well, but we aren't and at the same time they flog an altogether new account with a similar sounding name so you may catch it in the best buy tables and thing 'fantastic' but you'd be wrong. Martin's advice? Get them, set them up while the bonus rates are there, then diarise to ditch and switch when it ends.
Cash ISAs are usually seen as a better deal for savers because they provide tax free savings, but they're just as vulnerable to having their interest rates slashed.
Case 3: DIY and car enthusiast Alan Emsley from Cheshire is a loyal customer of Natwest. He had his Natwest ISA for six years, but shortly after paying in this year's maximum allowance, they gave him some very un-helpful news: they were dropping the interest rate from what it was at 3.01% to 2.70% for the year. Alan felt that they should have given notification of change before the new tax year came into play.
Martin explains that whether it's a cash ISA from this year or 10 years ago, never think that when the money is in there, it's a done deal. You have a right to transfer your ISA. Now don't do this by withdrawing the cash because then it's not a cash ISA anymore and you will lose your tax status. What you need to do is find the best paying new provider that accepts transfers and ask them to move the money across for you. Then your cash ISA will be in an account that pays better than your previous one.
So the advice is clear. If your bank or building society has cut the rate on your savings, look for a better deal. Those deals are there to be had.
COMPANY RESPONSES
A Nationwide spokesperson said:
Mr Searles has previously complained to the Society and we have written back to him at the time to address his concerns. He has made a number of points to both ourselves and Watchdog, which I will address in turn below.
Mr Searles is unhappy with the rate paid on his savings account during 2009. At the start of 2009 Bank of England Base Rate fell to its current historic low of 0.50%. Interest rates we pay on variable rate savings accounts are related to the Bank of England Base Rate, and we are unable to sustain rates at the previous levels seen when the Bank of England Base Rate was much higher. We need to manage the business in a prudent and sustainable way for all of our members and unfortunately this means that we have had to change savings rates in accordance with reductions in the Bank of England Base Rate.
The nature of online accounts such as e-Savings are that they are opened and managed online. Whilst Mr Searles may not have the time to visit the branch, he is a regular user of the online bank, and therefore can access all savings rates from the site before he signs in. Mr Searles has complained to Watchdog that the interest rates are not indicated clearly online, but as you can see from the link below the link to find savings interest rates is clearly shown on the right hand side of the main savings page on nationwide.co.uk.
http://www.nationwide.co.uk/savings/default.htm
Having said that, we are always looking to improve the service we offer our members and in November 2010, we introduced our 7 Savings Promises, and Promise number 6 states:
"We will contact you every year detailing our range of savings accounts, so you know about any new accounts we have launched. We will send you an annual savings statement showing the rate you are receiving, and we will always have our latest rates available at nationwide.co.uk."
The new statement sent to Mr Searles in November 2011 that clearly indicates the rates he was receiving on all his savings accounts.
In our last letter to Mr Searles dated 27 October 2011, we apologised for the fact that the levels of service he received were not at our usual high standards and as a gesture of goodwill we offered him £75 compensation. Mr Searles has chosen not to accept this compensation. The Society also outlined his rights to contact the Financial Ombudsman Service if he remained unhappy and they would independently investigate his concerns, but no complaint has been received.
A spokesperson for RBS said:
'We're sorry if Mr Emsley feels disappointed regarding the change to his Cash ISA. This product does have a variable interest rate and has remained unaltered since 2009. We regularly review all savings products and occasionally do have to alter the rates offered, however all affected customers are contacted in advance of any changes being made. If Mr Emsley chooses to move his ISA elsewhere he will be able to transfer to another ISA provider without losing the tax-free status. These rate changes were deliberately introduced during the ISA season, precisely so customers were able to look at all ISAs offered when the most competitive rates of the year are available.'
'It's important that customers keep track of their savings. To help do this we've started printing interest rates on paper statements and will be extending this online during 2012. We also have a free savings goal tool which helps customers monitor their funds online, and just last week launched a free budgeting tool allowing customers to easily keep track of their funds. We provide detailed product guides in branches and online, as well as contacting customers every year to invite them in for a personal savings review. We strongly recommend savers take advantage of these tools, to ensure they really are making the most of their money.'
A Lloyds TSB spokesperson said:
Lloyds TSB always encourages its customers to regularly review their savings rates and we are transparent in ensuring customers can easily find their current interest rate by publishing these online and on statements.
We communicate any downward changes in rates as we recognise that savers want to get the best return possible on their money.
Across our range, Lloyds TSB offers competitive products both with and without bonus rates, as there is strong customer demand for bonus accounts. We are upfront about any changes to the rate, and we write to customers at the end of their bonus or fixed period to explain that their rate has changed, so they are always in control.
Martin Lewis' Savings Tips...