The number of savings accounts paying interest of 0.1% or less has increased by 23% over the past year, leaving millions of savers earning next to nothing on their nest eggs.
A year on from Which?’s Great British Savings Scandal campaign, in which we revealed that one in four accounts in the UK were paying interest of 0.1% or less, the situation has not got much better for savers. While our campaign saw several banks agree to printing interest rates on statements, there’s been little change in rates for existing customers.
There has been some good news for new customers, though. The number of accounts paying 0.1% or less and still open for new savings has dropped by a third, to 77 over the past year. However, the number of accounts closed to new customers (known as superseded accounts) paying 0.1% or less has risen by more than 50% in the past year. On a balance of £5,000, you’d only earn £5 in annual interest in these accounts.
How have interest rates on savings changed?
The table shows how the number of savings accounts paying poor interest rates has changed over the past year. It shows accounts currently available to new customers and those closed to new business (‘superseded’).
|How many savings accounts are paying poor interest rates?|
|2010||2011||Increase / decrease 2010 to 2011|
|Accounts paying 0.1% or less|
|Total number of accounts paying 0.1% or less||313||384||+23%|
|Superseded accounts paying 0.1% or less||197||307||+56%|
|Currently available accounts paying 0.1% or less||116||77||-34%|
|Accounts paying 0.5% or less|
|Total number of accounts paying 0.5% or less||595||733||+23%|
|Superseded accounts paying 0.5% or less||341||546||+60%|
|Currently available accounts paying 0.5% or less||254||187||-26%|
Is a superseded account always a bad thing?
A superseded account doesn’t automatically mean you’re earning a poor rate of interest. Changes in the market mean accounts are now available to new customers for shorter periods before they’re withdrawn. As a result, many savings accounts become superseded while still paying a competitive rate of interest, usually thanks to a one-year bonus rate.
The downside is that you’re unlikely to be earning the interest rate currently advertised online and in-branch, particularly when the introductory bonus rate expires and the rate you’re earning plummets. You should regularly review the rate you’re on. Switching your £5,000 in savings from an account paying 0.1% to a Which? Best Rate account (currently paying 3.1%) would boost your annual interest from £5 to £155.