Pensioners denied best current account deals
Many pensioners are being frozen out of the best bank accounts, as the average state pension is too low an income to qualify for the top deals.
With interest rates still at a record low of 0.5%, many savers have been turning to one of the growing number of current accounts that pay as much as 5% interest on the balance - way better than the average top 10 savings rate of just 1.25%.
However, such accounts require a certain minimum amount to be paid in every month. And an analysis of the current 'best buy' in-credit current accounts by MoneySuperMarket has found that this puts them out of the range of many pensioners.
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"Many pensioners are suffering, as they can't benefit from the deals that the majority of consumers take for granted," says Kevin Mountford, MoneySuperMarket's head of banking.
"The money coming in each month for someone just on the state pension is too low to unlock the best current account rates due to the restrictive minimum funding requirements, leaving them frozen out of the best rates on the market, when many of them rely on savings to top up their income."
Only two accounts, he says, have a minimum weekly funding requirement of less than the average state pension of £115.95 per week. TSB's Classic Plus account, offering 5.00% AER on balances up to £2,000, has a minimum monthly funding requirement of £500 per month, or £125 per week.
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Santander's 123 Current Account paying 3.00% AER on balances of £3,000 and £20,000 is also accessible to pensioners who rely on the state pension to survive.
However, Lloyds Bank Club Lloyds Current Account, which pays up to 4.00% AER credit interest on balances between £4,000 and £5,000, has a minimum monthly requirement of £1,500. Similarly, the Nationwide Building Society FlexDirect Current Account pays 5.00% AER on balances up to £2,500, but requires a minimum of £1,000 to be paid in every month.
Research from MoneySuperMarket has found that 16% of savers aged over 55 have moved their money to a high-interest-paying current account over the last six years.
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However, says the firm, there are other good options for pensioners whose income means they don't qualify.
Virgin Money's Essentials Current Account, for example, pays 1.0% AER, and does not require any minimum funding; and the M&S Bank current account, which also does not ask for any funding, gives access to a 12-month fixed-rate saver paying 6%.
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"Providers should do more to cater to this group in other areas too. For instance, many savings accounts pay interest annually, which will not help many who depend on a monthly interest boost," says Mountford.
Pensioners, he says, should shop around for the best deal. But, he adds, "It's vital to read all the terms and conditions which come with an account to ensure you qualify for the benefits and can maintain the necessary requirements and don't end up paying any fees and charges that can be easily avoided."
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