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LEADING banks and building societies stand accused of treating savers unfairly. Since November last year Bank of England base rate has risen by 0.75 points to 4.25%. But many savers have seen much smaller rises. Sylvia Morris considers the evidence and passes judgment on whether banks and building societies are boosting profits at the expense of savers.
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DON'T think that rising interest rates mean you'll automatically benefit. How much banks and building societies pass on depends on the account you are in and, often, the amount of money you have in your account.
Savers stuck in old-fashioned notice accounts often take the biggest hit. In these, they have to give several weeks' or months' notice if they want to get out - or pay a penalty if they want their money immediately. So banks can award puny rises knowing you're powerless to do anything about it.
For instance, Abbey Investor 60 account holders have seen a rise of just 0.6 points against a base rate rise of 0.75 points in the past six months. So the bank has pocketed one-fifth of the base-rate rise.
Nationwide CapitalBuilder 90-day notice account holders have seen a measly 0.55 point rise. But those in its newer, higher profile easy access e-Savings now earn 1.05 points more.
Savers in Northern Rock Save Direct Tracker 90 account have received a paltry 0.4 points. The account is a typical example of banks and building societies offering high initial rates to lure savers.
The account comes with a guarantee it will pay at least base rate less one percentage point. A year ago, it was paying a headline rate just below base rate. But the bank has consistently given savers a lousy deal since then.
From next month they will earn just 2.6% after tax on sums up to £100,000 in this telephone account where you have to give 90 days' notice to get your money out without charge.
Short-term bonuses also hide horrors. Northern Rock has raised the underlying rate on its Online Tracker by just 0.55 points since base rates started to rise. But it has manipulated the headline rate by upping its bonus - payable for just six months - from 0.4 to 0.71 points.
Guilty or not guilty?
WHAT banks and building societies pay on their flagship accounts. Rates shown are after 20% tax, except cash mini Isas, which are tax free. Those companies that have passed on a before-tax rise of only 0.6 points or less since November 2003 are guilty of mugging savers.
ABBEY: EVIDENCE FOR: Cash mini Isa rises to 3.8% on sums of £1 to £5,999 from June 1, making a 0.7 point increase overall. Branch Saver rises to 2.68% - up 0.85 pts. EVIDENCE AGAINST: Direct Saver rises just 0.45 to 0.55 pts, while E-Saver and Investor 60 have risen by just 0.6 pts - the latter pays just 1.04% on £2,000.
VERDICT: Guilty on three counts
BRITANNIA: FOR: No evidence. AGAINST: EasySaver rise of just 0.5 pts on £1,000 to 1.84%. Capital Trust rises 0.45 pts to 0.8% on £1,000. Capital Trust 30 up 0.45 pts and Premium Saver up 0.5 pts. Both pay 1.84% on £1,000. Cash mini Isa up 0.5 pts to 4% on £3,000.
VERDICT: Guilty on all counts
EGG: FOR: Internet account up 0.75 pts to 3.4% on £1. AGAINST: Telephone account - no rise at all. Pays 1.6% on £1-plus.
VERDICT: Guilty on one count
HALIFAX: New rates still not announced following the 0.25 pt base-rate rise on May 6. FOR: Instant Saver at 1.6% on £500 and the internet Web Saver at 3.44% on £1 both up 0.45 pts so far. AGAINST: Liquid Gold up just 0.15 pts on £1, pays 0.2%, Saver Reward up 0.25 pts on £500, 60 Day Gold up 0.3 pts on £5,000, cash mini Isa up 0.3 pts on £1 and Premium Savings Direct up 0.35 pts on £5,000.
VERDICT: Jury still out
HSBC: FOR: Cash Isa savers have full 0.75 pt rise to 3.85% on £1. High Street Savings has risen 0.75 pts to 1.96% on £1 and 0.65 pts to 2.28% on £10,000. AGAINST: Instant Access Savings is up 0.75 pts to 1% on £1, but just 0.6 pts to 1.12% on £10,000.
VERDICT: Guilty on one count
INTELLIGENT FINANCE: FOR: Both accounts are up 0.7 pts overall. Direct Access Savings pays 3.4% on £1 and cash mini Isa 4.6%. AGAINST: No increase this time.
VERDICT: Not guilty
NATIONAL SAVINGS & INVESTMENTS: FOR: The Easy Access Savings Account was launched on January 29, 2004 and has passed on full 0.5 pt rise. Pays 2.4% on £1,000 and 2.84% on £10,000. The Investment Account is also up 0.75 pts to 2.24% on £500; 2.48% on £10,000. AGAINST: Savers have seen just 0.5 pts more on cash mini Isa. Now pays 3.95% on £10.
VERDICT: Guilty on one one count
NATIONWIDE: FOR: Cash mini Isa savers have seen 0.95 pt increase to 4.45%. Those in postal InvestDirect get 0.7 pts more at 2.88% on £1. The internet e-Savings pays 1 pt more at 3.6%. AGAINST: CashBuilder may be up 0.65 pts on £1, but for accounts at £10,000-plus rates are up 0.6 pts more at 1.08%. CapitalBuilder is up 0.55 pts at 2.12% on £1 and the notice account 60 Direct is up 0.6 pts at 3.12% on £1.
VERDICT: Guilty on three counts
NATWEST: FOR: Mini Cash Isa savers have received full 0.75 pts to 4.25% on £1. First Reserve is up 0.7 pts but pays a puny 0.96% to £5,000, and e-Savings now pays 3% on £1 to £24,999, a rise of 0.65 to 1.1 pts depending on balance.
VERDICT: No guilty
NORTHERN ROCK: FOR: No evidence. AGAINST: Not a single account comes close to matching base rate, even though many are called trackers. Save Direct Tracker 90, Save Direct Base Rate Tracker and Select 120 are up 0.4 pts. Tracker Online is up 0.55 pts. Instant Access Isa is up just 0.3 pts to 3.2% and the 30-Day cash mini Isa is up just 0.45 pts and, excluding an introductory bonus, pays 3.85%.
VERDICT: Guilty on all counts
TESCO: FOR: Savings Account up 0.75 pts to 2.48% on £1, 2.8% on £5,000.
VERDICT: Not guilty
YORKSHIRE BUILDING SOCIETY: FOR: Its internet-based E-Isa is up 1.1% from May 30 to 4.6% on £10, Isa Plus is up 0.8 pts to 4.35% on £10 and Access Saver increases 0.75 pts to 2.68% on £100.
VERDICT: Not guilty
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