Three competitive banks, HSBC, Co-operative Bank, and Ulster Bank turned out to be the most frugal institutions in Britain. According to the estimates, they pay about 1/65 of the other institutions’ payments size.
These three and some more banks were “discovered” in the new light by the special Sunlight campaign by the Financial Conduct Authority. The project’s main purpose is to shame the institutions that treat their clients bad and make them fix the situation.
Out of 32 organizations that offer accounts for savings, Ulster Bank became the worst, offering only 0.01% to their savers. Besides, such saving accounts are no longer given to their new customers. The annual reward is 10p if a person has a £1,000 balance, which is 1/10 part of the average revenue. Moreover, it’s 1/65 part of the payments by the most generous institution – Metro Bank. The Danish Bank that also works for clients in Northern Ireland turned out to be as low-paying, despite the fact is has 46 branches over the country.
Regulators have become increasingly concerned about the “bait and trap” tactics of banks, which entice savers with a good headline rate, only to allow the rewards to dwindle as time goes by. The most loyal customers get treated the worst and competition does not work, the FCA says.
Customers are not kept properly informed of the rates they are receiving and are put off switching by the perceived hassle and the expectation that the gains will be small. Eighty per cent of easy access accounts have not been switched in the past three years.
Price comparison websites give no clue to how savers will be treated in the long run because they rank and advertise only savings products available to new customers and sometimes favour banks paying them most commission.
The FCA said: “We are publishing this information to raise awareness of firms’ strategies towards their longstanding consumers, and to allow a comparison between open and closed accounts. This should also encourage firms to offer better-value products to existing consumers, especially those firms with products no longer on sale.”
New rules implemented yesterday force savings institutions to provide customers with easy to understand information in a summary box and to remind them when favourable introductory interest rates expire. Low savings rates have shot up the political agenda after Theresa May said that savers had found themselves poorer after the financial crisis and “a change has got to come”. The ultra-low base rate of 0.25 per cent and plentiful cheap funding from the Bank of England mean banks are under no great pressure to compete for the nation’s savings.
TSB and Marks & Spencer Bank, which is part of HSBC, were identified as the least generous for instant access cash ISAs offered through branches, each paying an interest rate of 0.05 per cent to customers in accounts no longer available to new customers.
The median equivalent account paid five times as much, while the most generous institution, Coventry Building Society, paid 1.15 per cent, or 23 times as much. Similar patterns were found for phone or internet-based accounts closed to new customers.
HSBC said it looked bad in some cases because the FCA methodology required it to volunteer the minimum interest paid, even if this was triggered by a withdrawal. Danske said: “We would always encourage customers to talk to us to see if their savings could be working harder for them.”
The FCA tables were based on interest rates on October 1.
Best and worst deals
Branch-based easy access accounts no longer offered to new customers
Worst rates: Ulster Bank 0.01%; Danske Bank 0.01%; HSBC 0.05%; First Trust 0.05%; Co-op Bank 0.06%
Best rate: Metro Bank 0.65%
Branch-based cash ISA accounts no longer offered to new customers
Worst: TSB 0.05%; M&S Bank 0.05%; Newcastle Building Society 0.1%; Bank of Scotland 0.1%; HSBC 0.2%
Best: Coventry Building Society 1.15%