Revealed: the UK's worst savings accounts
It is already difficult for savers to get a decent return on their cash. There are low interest rates across the board and many accounts are returning less than the rate of inflation.
Yet some providers are plunging new depths by paying as little as 0.01% interest to struggling savers.
A Moneywise investigation into the market found dozens of accounts on sale at the time of writing paying paltry rates of interest of well below the Bank of England’s 0.25% base rate.
We searched the UK’s major banks and building societies and discovered accounts from Clydesdale Bank, HSBC, NatWest, Royal Bank of Scotland and Yorkshire Bank paying just 0.01% interest on balances of £5,000. To put that into context, if you saved this amount for a whole year you would earn just 50p for your trouble.
As well as these low paying accounts there were even more offering 0.05% interest. Particularly disappointing is the number of local building societies giving such poor returns. Saffron Building Society, Vernon Building Society and West Bromwich Building Society all offer accounts with just 0.05% interest. See our table below for a full list of the worst offenders.
Don’t become a shameful saver
Money often ends up in these low-paying accounts when other savings products have matured. While banks and building societies are required to contact customers when rates change, it can be difficult and confusing for consumers to find out what their account offers.
A look at many of these accounts onlineleaves a lot to be desired. Terms such as “reliable” and “simple” are used to describe these products, yet information on the pitiful rates is often hidden in the small print or on another page entirely. Yorkshire Bank’s website says its Instant Savings account offers “tiered interest rates” based on your balance. Yet every single tier actually pays the same woeful 0.01% rate.
If you’re unsure what you’re earning from your account you should contact your bank or building society immediately.
When we asked providers to justify these low interest rates, they typically said they offer a range of accounts to suit all needs - something which doesn’t help consumers unknowingly languishing on these low rates. You can see a full list of responses on our website.
Plus, remember that while these accounts are the very worst on the market, there are many more paying pitiful rates of 0.1% so make sure you check your interest rate and switch if that’s the case.
Despite returns on savings remaining low across the market, switching away from these accounts to today’s best buys can give you more than 100 times the return.
The top easy-access account is RCI Bank Freedom Savings Account, which pays 1.1%, while those willing to fix for a year can get 1.65% with United Trust Bank. You can also earn up to 5% from certain current accounts, although these will require you to jump through some hoops.
If you’re with one of these accounts, email your story to email@example.com
|Provider||Brand Name||Rate on £500 balance||Rate on £5,000 balance||Rate on £50,000 balance|
|Allied Irish Bank (GB)||Demand Deposit Account||0.05%||0.05%||0.05%|
|Bank of Ireland (NI)||Classic Saver||0.05%||0.05%||0.05%|
|Danske Bank||Danske Choice Plus Savings Account||0.05%||0.05%||0.05%|
|First Direct||Savings Account||0.05%||0.05%||0.05%|
|HSBC||Flexible Saver Advance||0.05%||0.05%||0.05%|
|Saffron Building Society||Easy Access Account||0.05%||0.05%||0.05%|
|Vernon Building Society||Instant Access||0.05%||0.05%||0.05%|
|West Bromwich Building Society||Base Rate Tracker||0.05%||0.05%||0.05%|
|West Bromwich Building Society||Direct Tracker Saver||0%||0.05%||0.05%|
|West Bromwich Building Society||Oak Account||0.05%||0.05%||0.05%|
|West Bromwich Building Society||Premium Share||0.05%||0.05%||0.05%|
|Clydesdale Bank||Instant Savings||0.01%||0.01%||0.01%|
|Clydesdale Bank||Savings Account Plus||0.01%||0.01%||0.01%|
|Danske Bank||Midas Gold||0.01%||0.01%||0.01%|
|Danske Bank||Savings Account Plus||0.01%||0.01%||0.01%|
|Royal Bank of Scotland||Instant Saver||0.01%||0.01%||0.05%|
|Ulster Bank||Easy Access Savings Account||0.01%||0.01%||0.05%|
|Ulster Bank||Loyalty Saver||0.01%||0.01%||0.05%|
|Yorkshire Bank||Instant Savings||0.01%||0.01%||0.01%|
|Yorkshire Bank||Savings Account Plus||0.01%||0.01%||0.01%|
Here’s what the providers had to say:
Allied Irish Bank (GB)
AIB (GB) offers competitive long-term deposit rates for personal customers in a low interest rate environment. Customers with Demand Deposit accounts are provided with 60 days’ notice of a rate change.
Bank of Ireland (NI)
Did not respond to request for comment.
Did not respond to request for comment.
Did not respond to request for comment.
Clydesdale Bank and Yorkshire Bank
Customers received 60 days notification of the last rate change, which was made in response to the base rate change to 0.25%. In addition the rate is printed in a visible position on all statements. In a low rate environment those products offer simple, free and instant access to money as well as security.
We offer our customers a range of savings accounts to suit different needs and circumstances. When we change rates we write to customers two months in advance and clearly explain the different options available to them, including details of alternative products. We would always encourage customers to talk to us to see if their savings could be working harder for them.
First Direct and HSBC
Customers have a range of motivations when opening a savings account including saving for something specific, to earn interest or as an additional transactional account. Depending on how they use their accounts customers look for different features to meet their needs including interest rates, service quality, and access/convenience.
Our HSBC Flexible Saver is designed to encourage a savings habit, providing easy access and the convenience of managing their account using various channels as well as paying interest.
NatWest, Royal Bank of Scotland and Ulster Bank
In a historically low interest rate environment, we continue to encourage savers with a range of accounts to meet their needs.
Saffron Building Society
The Easy Access Account is a long standing product in our range which customers tend to use as a holding account from which they move money into and out of other savings accounts. The average balances are low with 58% of accounts having less than £50. The benefit for the customer is that it is an immediate access account and an easy vehicle to manage their money dependent upon their savings goals. It is not intended to be a long-term savings account.
Vernon Building Society
Our Instant Access account has an interest rate that represents the high transactional nature of the account and the cost to the society of running it.
West Bromwich Building Society
We do have some legacy accounts such as Premium Share, which we no longer actively promote because they are not offering a competitive rate of interest. Customers are free to move funds from this account at any time and we will gladly introduce them to other investment opportunities with the society, which may be better suited to their needs.
For the society’s savings products which track the Bank of England base rate, it is part of the terms and conditions that any movement (up or down) in bank rate will be reflected in the rate of interest within seven days and customers should be aware of this based on their original applications.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.