JEFF PRESTRIDGE: Rates are rising but savers need to be vigilant

Savers are slowly beginning to reap the benefit of higher savings rates, although the pennies and pounds that they receive by way of interest will do little to make up for the erosive impact of inflation on their money. It’s running at 9.1 per cent and heading into double-digit territory. 

Although savings rate rises are most welcome – we’ve been screaming for them since last December when we launched our Give Savers A Rate Rise campaign – they shouldn’t lure savers into a false sense of security. 

Just because the interest rate has tickled up doesn’t mean a saver is necessarily getting the best deal on the particular account they have with their bank or building society.

It’s a point that a number of readers have made in recent days with regard to ‘issue’ savings accounts that many providers offer. 

Typically, what happens with issue accounts is that when savings rates change, providers will launch a new version (issue) of the same account paying a different interest rate to what went before. 

When rates are rising, as they are now, the new issue will invariably pay a superior rate to that paid on earlier versions. But existing savers won’t automatically benefit from the new issue rate. To get it, they must transfer their money out of the old account and into the new one. Failure to do this will result in them languishing in an inferior account. 

Only proactiveness is rewarded. Apathy just does not pay. 

Many providers are guilty of treating savers in the same account differently, depending on when they signed up. 

Yet it’s customers of Nationwide Building Society who are complaining the loudest. Why? Maybe, because of its size. Or maybe because it’s a mutual and customers expect fairness to be at the heart of everything it does. 

Nationwide has launched the 14th issue of Triple Access Online Saver, providing an annual interest rate of one per cent. As the name implies, the account permits three withdrawals a year – any more reduces the rate. 

But versions 12 and 13 are paying inferior rates of 0.45 and 0.8 per cent respectively. Although these rates will all tickle up by 0.05 percentage points this Friday, they will still not come anywhere near the one per cent on offer from issue 14.

To enjoy the benefit of one per cent interest, savers in these older issues must first open a new account – and then transfer the money across. 

One Nationwide saver I spoke to last week about this is proactive enough to respond to each new issue of Triple Access by opening a new account and then transferring into it what he has saved in the older issue. 

‘It’s a bit of a faff,’ he says, ‘but I do it. Yet I do wonder about less tech-savvy customers. I am sure many of them just stick with the issue they took out originally.’ His view is that Nationwide is chasing new customers at the expense of existing (apathetic) savers. ‘How does it sit with treating customers fairly?’ he asks. 

Nationwide’s take on this is that existing Triple Access customers ‘can open a new account [issue] in a matter of a couple of clicks and transfer the money straightaway’. It also says that members signed up to its ‘savingswatch’ service receive a text or email whenever a change is made to their savings rate. They are also emailed when a new account is launched which may offer them a better rate. 

But, tellingly, it wouldn’t tell me what percentage of existing Triple Access savers automatically transfer their money into the latest issue, thereby giving them the best rate. 

Nationwide is not alone in operating such a savings tactic – Yorkshire Building Society and Sainsbury’s Bank, among others, do the same thing. 

Is it right? I don’t think so. It’s the same with the inferior rates on offer to savers with fixed-term cash Isas, compared to equivalent traditional fixed-term savings bonds. 

According to rate scrutineer Savings Champion, the likes of Charter Savings Bank, Kent Reliance and Tesco Bank are all paying less interest on one-year fixed-rate bonds held inside an Isa. Providers have created an imperfect savings market that bleeds the apathetic. 

Vigilance must be the order of the day.