A Which? Money investigation into what happens when a fixed-rate savings account term ends has uncovered poor practice and unclear information by certain banks and building societies.
The end of a fixed-rate savings bond
Our research reveals that you could find your savings dumped into an account paying as little as 0.1% interest; or worse, rolled into another fixed-rate savings account with only a short window of opportunity to withdraw your money before it’s locked in again.
The AA, Aldermore, Barclays, Clydesdale, Lloyds TSB, National Counties Building Society, Norwich & Peterborough Building Society, Skipton Building Society and Yorkshire Bank stand out as some of the worst offenders.
Rollover fixed-rate savings accounts
When your fixed-rate savings account ends, your bank or building society will write to you and outline your options. But if you don’t respond to that letter – perhaps because you’re away or you simply forget – your savings will be put into a rollover account.
Some banks roll your money into an easy-access account paying barely any interest. The AA and Norwich & Peterborough Building Society were the worst offenders of the companies we surveyed, paying just 0.1% on balances up to £50,000.
Other banks roll your savings into another fixed-rate bond, usually of the same length as the original. That’s all well and good if you’re happy with the rate on offer and want to tie-up your money again. But if you need access to your money it can cause problems.
With some fixed-rate rollover accounts you can withdraw your money at any time, subject to a penalty. But with others your only chance to get your money out is during the cooling-off period.
Aldermore, Barclays, Lloyds TSB, National Counties BS and Skipton BS don’t allow withdrawals after the cooling-off period and also have some of the shortest cooling-off periods.
Which? calls for improvements to fixed-rate savings accounts
Principal money researcher, Melanie Green said: ‘Banks and building societies need to make their fixed-rate maturity arrangements as fair and transparent as possible. We think this means sending maturity letters at least 30 days before the fixed-rate ends, providing clear maturity letters, giving a cooling-off period of at least 30 days for fixed-rate rollovers, ensuring all fixed-rate rollover accounts allow withdrawals after the cooling-off period and paying decent rates of interest on easy-access rollover accounts’.
If you’re coming to the end of a fixed-rate savings account, compare how your bank’s rates compare to the best on offer by going to our review of fixed rate savings accounts.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.