Rip-off banks deprive savers of £2.86 billion a year

Banks are playing Scrooge again. A new study has revealed that rip-off banks have withheld £2.86 billion worth of interest from adults with easy-access saving accounts - a plus another £77 million from children.

The research, from Savingschampion.co.uk, highlighted that the best-buy rates on instant access accounts for adult savers had fallen by more than a third since 2013 - which means lost interest of £2.86 billion a year. Younger savers, meanwhile, had seen their interest cut by 6% in that time. These cuts have come despite the fact that the Bank of England base rate has remained unchanged.

Back in 2013, the average rate for the top five easy access accounts was 2.25%. Fast forward to today, and that average is just 1.44%. Meanwhile, children have seen a drop from an average of 2.67% to 2.52%.

Susan Hannums, Director at Savingschampion.co.uk says that the catalyst for the falls was the Funding for Lending Scheme in 2012. The idea was for the government to lend to banks at almost 0% interest, in order to kick start mortgage lending and boost the economy. The unintended side-effect was that the banks no longer needed to compete for savers' money by offering attractive interest rates on savings accounts - so savings rates plummeted.
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The FLS scheme expires this year, but banks have another four years to lend out the money - so many will have stocked up, and will not have to increase savings rates in the near future.

Research from the FCA found that if you have an older account, you are likely to be suffering even stingier savings rates, especially where the account initially had a bonus to tempt people in. It highlighted that old accounts from a number of banks were offering just 0.01% to savers - including Danske Bank, Progressive Building Society, Skipton Building Society and Ulster Bank.

It emphasised that it's important to check your account against the market regularly. There may not be many bumper accounts on the market at the moment, but some of the best rates are around 1.5% - which is better than earning just 0.01% on your savings.

It's also worth considering whether cash savings are the only option for you. If you have a higher risk tolerance, and are putting money aside for ten years or more, it's also worth looking at share-based investments such as stocks and shares ISAs. These can lose money, but they also have more potential for growth, so as long as you understand the risks, you may find a place for it in your portfolio.