I had a mystery communication from Lloyds Bank the other week. It informed me that my Easy Saver account will be changing to a Standard Saver in September and I’ll then get a lower variable rate of just 0.05% in interest. Not great news at any time but the thing is – I don’t have an Easy Saver account.
I wondered if there was some weird administrative glitch which had caused this letter to arrive. There isn’t. I do have an Online Saver account which is already paying the measly 0.05% rate. And also a Standard Saver already – same pathetic return. So I suppose the upshot of the letter is that Lloyds will continue to pay me rubbish interest on my money. And me a customer of some 30 years or more!
Luckily I’ve got about £20 in each account otherwise I would have to take action. I also tend to use them for budgeting rather than saving. It’s useful to have a holding pen for spare cash not spent in the month or short-term borrowing for big-ticket items. Even so, the tiny rate rankles. By keeping my spondulicks in this account over the long term, I am actually losing money. The increase in the cost of living (inflation) is currently running at about 2.6%. My cash is earning 0.05%. Wow - I’d be better off spending it all.
What I should do is look around for a better rate and move the money. This is theoretically easy to do. You simply go to the ‘best buy’ tables and see what’s at the top. We like Money Saving Expert and our old workplace, Money Mail, for this. But once you’ve selected your new account, you then have to fill in a load of forms, sign stuff and, if it’s online, create new passwords … yawn.
Inevitably the best deals are reserved for new customers. Banks and building societies rely on exactly that customer inertia to shuffle you on to a paltry rate once your introductory deal has expired. For example, I could get up to 1% by moving to an easy access account (one that allows withdrawals) and around 2% if I locked my money away for a period of time. But with neither of those figures beating inflation, I’m not sure I can be bothered.
Fortunately the authorities have noticed that the current scenario is not doing enough to stir up competition among the banks (and thereby give their customers a better deal). But whether they will introduce rules to give us all better interest rates is a different matter. In the meantime, I’ll be considering other homes for my savings. After 10 years of ultra-low interest rates, is it any wonder that shares and property prices are now so incredibly high?
For the SMM guide to savings accounts, see here.