It will come as no surprise to those already aware of miserly interest rates all year, that a majority of the top 50 instant access savings accounts for balances of £5,000, (56% ie 28 in number) had restrictions and penalties around savers accessing their money, up from 48% (or 24) in October last year. The average size and duration of short-term bonuses used by a number of these accounts have fallen.
The findings, from research commissioned by Investec reveals that in October 2019, only three of these savings accounts didn’t allow further withdrawals in the calendar year once the maximum permitted had been reached. By October 2020, one in five have applied this restriction.
Only six of the top 50 accounts in 2019 were restricted to certain age groups or current account customers of the providers, but this has risen to eight a year later.
In terms of short-term bonuses to inflate returns, in October 2019 seven of the top 50 used them, the same number as today. However, last October the average bonus of the seven accounts in the top 50 was 0.43, and the average duration was 12.4 months. The corresponding figures for the seven accounts with bonus rates in the top 50 at the end of October this year were 0.34% and 11.1 months respectively.
The Investec Online Flexi Saver pays 0.55% AER on balances between £5,000 and £250,000. Clients can make as many deposits and withdrawals as they like, whenever they want to, with no fees or penalties. Interest is paid on a monthly basis, and opening an account is quick and easy to do as Investec is using some of the latest technology to provide a slick application process. The Online Flexi Saver Account is opened and managed entirely online.
It features second in the top five best buy table from Savings Champion. Top is Aldermore’s Double Access Account Issue 1 which pays 0.60% with a minimum investment of £1,000. A maximum of two easy access withdrawals are allowed per year, additional withdrawals will result in the rate dropping to 0.10% for the remainder of that year. Interest is paid annually or monthly and the account is also opened and managed entirely online.
Linda Brown, head of savings at Investec, said: “Compared to a year ago, our research reveals a general rise in the use of penalties and restrictions among the top instant access savings accounts, and the short-term bonuses used by many are less competitive.
“Savers need to consider the terms and conditions of any savings account they choose, as well the interest rate on offer. With all of our savings accounts, we offer rates that don’t rely on short-term bonuses as well as fair and transparent terms and conditions.”
Andrew Hagger, founder and director 0f MoneyComms, which carried out the research, said: “It’s quite challenging for savers to find a truly ‘clean’ easy access savings account offering a reasonable return.
“Too often, some of the best buy rates come with a catch, such as limiting the number of withdrawals permitted, these accounts don’t really deserve to be labelled ‘easy access’ because sometimes they are anything but.”
Anna Bowes, founder of Savings Champion said: “What we can expect next is the six-million-dollar question! There is still so much uncertainly with both the Vaccine hope and the big Brexit deal or no deal situation that it’s impossible to make a call.
“That said, the vaccine programme could see the beginning of the economic recovery, which in turn could push up inflation – which may lead to an increase in the Bank of England base rate and hopefully savings interest rates.
“There are also new banks waiting in the wings and as we’ve seen before, these new banks seeking new customers can often set a cat amongst the pigeons, albeit usually only for a short period.
So, in summary, although things are tough for savers, it still makes sense to check what you are currently earning – and switch. It can make a difference.”
Further reading: Best savings products and providers highlighted