Savings accounts paying 0% interest

Shamed banks may have to tell savers of better deals elsewhere

‘Be aggressive and active’

MISERLY banks are giving customers zero interest on some ‘savings’ accounts.

Watchdogs yesterday named the Post Office, HSBC and First Direct as the worst offenders.

The Financial Conduct Authority could now force poor payers to alert customers to better rates elsewhere.

To highlight the harsh treatment of savers it published the lowest interest rates offered by 32 providers. The Post Office was found to pay nothing on one easy access savings account. HSBC and First Direct offered a derisory 0.05 per cent.

All three have accounts closed to new customers that pay nothing. Tens of billions of pounds are languishing in zero-interest savings accounts.

‘Savers have been cheated by banks and building societies,’ said Ros Altmann, the former pensions minister. ‘There is definitely sharp practice out there and I’m really pleased the FCA is trying to name and shame the firms who are treating savers so shabbily.

‘If returns in savings accounts dwindle to nothing there is a real danger people will not bother to save for the future and will take on more debt. Many people are completely fed up with the banks’.

The figures show that banks and building societies often offer better deals to new customers but then lower the rates.

Marks & Spencer pays 1.3 per cent on one of its easy access cash Isas, but just 0.05 per cent to customers with money in one of its closed accounts.

Although interest rates have been frozen at a record low for more than seven years, banks and building societies have continued to slash the amount they pay.

Rates are now the worst on record and are expected to fall again from next month because the Bank of England is expected to cut its base rate from 0.5 per cent to 0.25 per cent. The FCA said the treatment of long-standing customers in the savings market will be one of its top priorities this year.

Martin Lewis, of the Moneysavingexpert website, said: ‘Many banks have done everything they can to disguise the fact they are paying pitiful amounts to savers. The only way to be a decent saver is to be aggressive and active – to monitor rates and switch when an account is no longer paying enough.’

The FCA is testing ways to prompt savers into switching to a better deal.

It said that digital alerts via text messages and emails were the most effective – meaning it could soon force banks to send these warnings to their customers. From Decem- ber banks will be forced to send clear reminders to customers about changes in interest rates.

All statements – whether post, email or text message – will have to include the current interest rate.

Banks will have to give customers detailed information on the interest they are being paid in a ‘summary box’ when they take out an account. This includes spelling out how much they could receive in pounds and pence on a £1,000 investment.

The crackdown is a major victory for Money Mail which has long campaigned for banks to give clearer information on rates.

For years, when interest rates were higher, banks routinely tempted investors with attractive high – or ‘teaser’ – rates on new savings accounts, only to slash them by stealth a short time later.

Millions of customers found their money sitting in a ‘zombie’ account paying little or no interest.

It is still possible to get a decent return on your savings. First Direct pays 6 per cent on its Regular Saver Account if you keep the money tucked away for a year.

HSBC, which owns First Direct, said: ‘ 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.’

A Post Office spokesman said it was always open and transparent about its rates. He added: ‘All our savings accounts are offered with an interest rate of at least 0.1 per cent. The FCA report gives the impression that we have had a 0.0 per cent rate, but it is important to emphasise that this is not the case.

‘This relates to some of our products that require a minimum £500 deposit and where we make clear to customers that they will not be eligible for interest if the amount in the account falls below £500.’