moneysaving

Banks have been slammed for failing to resume normal opening hours, with some branches only open for a mere four hours a day.

Many branches restricted services during lockdown as they battled staff shortages, with some closing their doors altogether. 

It has meant customers have been forced to queue around the block, with some being turned away and told to do their banking online.

Now, nearly five months on, major banks have told Money Mail that the majority of their branches are STILL not providing a proper service.

Experts say this just isn’t good enough when other shops and restaurants are operating normal opening hours.

Many fear it is a cynical attempt to speed up branch closures, as firms will be able to claim fewer customers are using them.

Just last week, Barclays chief executive Jes Staley said the banking giant was ‘carefully reducing the number of under-used branches’.

‘The more we can get consumers migrating to our digital offering and using our banking app and online to manage their transaction volumes, the better for us,’ he added.

Santander’s finance chief Jose Garcia Cantera also acknowledged the bank had been forced to ‘rethink’ its business model, with ‘certain trends emerging’.

Lloyds Banking Group, which includes Halifax and Bank of Scotland, says the majority of its branches are operating reduced hours between 9.30am and 3.30pm. Before lockdown many were open between 9.30am and 5.30pm.

Barclays says that around 95 per cent of its branches used to open between 9am and 10am at least one day a week and close between 4.30pm and 5pm.

Now branch hours vary across the network, but are 30 per cent shorter than before the pandemic, according to the bank. 

Face-to-face appointments are also restricted unless critical, with customers instead offered phone or video slots.

All of Santander’s 565 sites have reduced hours, opening between 10am and 3pm, with some closing at 2pm. 

Before lockdown, branches were open 9.30am to 5pm on weekdays and 9.30am to either 12.30pm or 4pm on Saturdays.

And whereas 80 per cent of branches used to open on a Saturday, fewer than half (256) do now. 

The bank has also temporarily closed some branches as a result of staff shortages. For example, on Monday, 20 branches were closed, while the bank’s 50 university sites have been shut since March 18.

At HSBC, more than a third of its 621 branches are currently open between 10am and 4pm, Monday to Friday. The remainder close at 2pm, but are expected to be open for longer by mid-August.

Before lockdown, most of its branches were open between 9.30am and 4.30pm, or 9am and 5pm.

The majority of NatWest branches are now only open between 10am and 3pm. Previously, many branches opened at 9am and closed at 5pm.

Customers are only able to make face-to-face appointments in an exceptional circumstance, such as following a bereavement. Around 5 per cent of branches remain shut.

At Nationwide, branches are open between 9am and 3pm, or 10am and 2pm. Before lockdown, hours were 9am to 4pm or 5pm. 

An estimated 2 per cent of its branches are still shut, and the building society encourages customers to visit only if absolutely necessary.

Banks say opening hours remain reduced due to a lack of resources. Staff have been shielding, have childcare responsibilities, or are needed in other parts of the business. 

The shorter hours help them avoid busy travel times. Firms say the hours also reflect a fall in local demand.

Research by Which? shows a third of bank branches have been lost in just five years.

James Daley, founder of campaign group Fairer Finance, says: ‘There’s no good reason why banks should be continuing to operate reduced branch hours now. 

‘Many people still rely on branch access in the UK, and banks need to do everything to keep these services operational.’

He warns that while many customers may have used online services over lockdown, banks should not use this as an excuse to accelerate branch cutbacks. 

‘Bank branches are still a lifeline for vulnerable citizens — as well as for small local businesses — and these customers need to have viable alternative payment and deposit solutions before banks cut back their services,’ he adds.

Caroline Abrahams, charity director at Age UK, says: ‘Now that the retail sector has returned to normal opening hours, and shops are open, banks must return to their usual opening times.

‘It is essential for many older people that they are able to visit their bank to get the cash they depend on for essential products and services, and at the times convenient for them. 

‘A return to longer opening hours will also mean less queuing outside branches, which is vital for older customers.’

Banking trade body UK Finance says: ‘The vast majority of bank and building society branches have been open throughout the crisis, whilst following government guidelines on social distancing and health and safety in the workplace. 

‘Firms continue to review customer demand for branch-based services and keep their websites up-to-date with the latest information on opening times.’

[email protected]

Current account customers who switch to Halifax using the official service can get a £100 bonus from today, in a move that might help revive competition among banks and building societies.  

Those who earn hundreds of pounds from regularly switching accounts will hope the move from one of Britain’s biggest banks will spur others into action and lead to a resurgence in welcome bonuses.

The move from Halifax comes just days after data from the official switch service found fewer people switched bank accounts between April and June than in March alone, after banks shelved three-figure switching bonuses and closed current accounts to new customers.

And Halifax, part of Britain’s largest current account provider Lloyds Banking Group, announced the £100 switch bonus after the same figures found it had lost more than a net 92,000 accounts between January 2019 and June 2020.

However, it has still been the third most successful bank since the start of 2014, despite leaking switching customers over the last 18 months.

What is the offer?

Halifax is offering £100 to customers who switch to either its Reward or Ultimate Reward current account through the Current Account Switch Service.

The welcome bonus will run between 4 August and 15 September.

Unlike many current account switch deals, there doesn’t appear to be a cut-off point after which you cannot have held a Halifax account in order to benefit from the offer.

The money will be paid in full before the seven-day switchover takes place, Halifax say. The bank last year offered a £135 switch bonus, but that was paid in two parts, with £85 paid upfront.

Both accounts themselves, which must be opened in-branch, online or by phone before the switch from an existing account can take place, do come with catches.

Its Reward account requires customers to pay in £1,500 a month or else it comes with a £3 monthly fee. 

If customers want rewards, they must either spend £500 a month on their debit card or keep £5,000 in their account for a full month.

In return, they can choose either two digital film rentals each month through Japanese streaming service Rakuten TV; three digital magazines a month from Hearst; a Vue cinema ticket every month or £5 a month paid into their account.

If a customer kept £5,000 in their account for a full 12 months and opted for this last option, this would be £60 a year, or roughly 1.2 per cent interest on the balance. 

This is Money ran through the changes made to the account at the start of June in March.

It also comes with an overdraft rate of 39.9 per cent APR, with no fee-free buffer.

Meanwhile, Halifax’s £17-a-month Ultimate Reward account offers those benefits, plus a £50 fee-free overdraft buffer, plus a range of packaged bank account benefits. 

These include AA breakdown cover, home emergency cover, mobile phone insurance and worldwide travel insurance from Axa covering a trip of up to 45 days.

However, the travel insurance will not cover holiday cancellation or early return costs which result from the coronavirus. 

It will cover medical expenses if you fall ill while somewhere the Foreign Office hasn’t advised against visiting, ruling out someone who becomes ill after travelling to Spain, for example.

Are there any other deals out there?

The current account switching landscape has been something of a barren wasteland since mid-March, with the likes of First Direct, HSBC, NatWest all pulling three-figure switch offers, likely contributing to fewer than 30,000 people moving accounts in May and June.

The sole other welcome bonus which currently exists is for TSB’s Classic Plus account, available through cashback site Quidco. 

There is a £50 welcome bonus if customers open the account, pay in £500 in three out of the first four calendar months since opening, make two transactions and go paperless.

The account also pays 1.5 per cent interest on balances of up to £1,500 provided customers pay out two direct debits each month, around £22.50 a year in interest on the full balance.

And while there are no switching deals, some accounts do exist which pay interest or rewards in the same way Halifax’s account does. NatWest’s Reward account pays £5 a month back if customers pay in a slightly lower £1,250 a month, pay out two direct debits and log into mobile banking once a month.

The account does come with a £2 monthly fee, cutting the maximum customers can earn to £36 a year.

Halifax’s stablemate Lloyds Bank offers its Club Lloyds account, which pays a blended interest rate of around 1.2 per cent on balances of up to £5,000, although this will be cut to around 0.8 per cent from October. 

This works out at around £39 a year in interest on the full £5,000 balance.

Like Halifax, it requires £1,500 a month paid in a month or charges a £3 fee and requires two direct debits to be paid out before any interest is earned.

Nationwide’s FlexDirect account pays 2 per cent interest for the first 12 months on balances of up to £1,500 a month, although it used to pay 5 per cent on up to £2,500 until May.

What about packaged bank accounts?

There are some alternatives to Halifax’s Ultimate Reward account if customers are looking to open a packaged bank account, where customers pay a monthly fee in return for benefits.

NatWest’s Reward Silver account is open only to existing customers right now, but if they are looking to trade up for £10 a month they will get European travel insurance up to 22 days per trip, fee-free purchases abroad, mobile phone insurance which covers one repair a year and discounted cinema tickets.

The travel insurance also covers cancellations due to a customer having coronavirus if they weren’t aware of it when they booked their trip, or cancellation due to a change in Foreign Office advice after they have booked, and it covers medical expenses, including cutting short a trip due to coronavirus, if there is no Foreign Office advice against travel in place.

Meanwhile Nationwide’s £13-a-month FlexPlus account is still available to new applicants, even if it is less generous than it was before cuts to its interest and overdraft buffer were made last year.

It provides UK and European breakdown cover, worldwide family mobile phone insurance, fee-free card spending and ATM withdrawals abroad, and worldwide travel insurance.

The insurance will cover medical expenses, cutting short a trip or cancellation of one, provided customers are not travelling against doctor’s or Foreign Office advice.

Another record month for Premium Bond buys: Billions more are now in the draw – does it make the odds of winning a £1m jackpot far slimmer?

• Savers have poured billions of pounds into Treasury-backed NS&I since March 
• The bank is effectively propping up savings rates and hoovering up billions 
• There were 6.2bn £1 Premium Bonds bought between March and June as savers faced with paltry interest rates take a punt in the hope of winning £1m

By George Nixon For Thisismoney.co.uk

Published: 11:53 BST, 3 August 2020 | Updated: 11:55 BST, 3 August 2020

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

In recent months, whenever I go to refresh the This is Money five best cash Isas guide while working from home, I put my head in my hands.

Rates haven’t just fallen off a cliff – they’ve somersaulted into the Mariana Trench, and are sinking so fast, it’s hard to see them bobbing back anytime soon.

It’s too late to give the piggy bank a life jacket and some flippers.

Now, in the topsy-turvy world of tax-free savings, if you want to beat the best easy-access deal on offer from National Savings and Investments, you’ll have to lock away your money for a mammoth five years. 

Just to rewind, five years ago, we’d just had a general election with an EU referendum yet to be confirmed, Leicester City were about to embark on a wild and unexpected Premier League title and David Bowie was still a living legend.

In other words, it feels like an incredibly long time to lock away money. 

The top one and two-year fixes, a popular choice for many to earn a little more interest, now pay less than that NS&I instant-access account.

The Government-backed operator is offering the top deals and ultimately, if and when they vanish, rates will collapse to a point where it could be a long time before we see 1 per cent or more on offer.

This is a rate so uninspiring, many will simply shrug and say: what’s the point of earning a tenner on £1,000? Although encouragingly for some, lockdown has kick-started the savings habit despite the low rates.

Recently, NS&I upped its financing target by nearly 500 per cent to £35billion in a move that has helped prevent a complete collapse of rates.

But how long it remains a best buy destination remains to be seen. Billions has been pouring into it since the start of the coronavirus pandemic.

Big banks have been a terrible place to hold savings for a few years – we’ve seen that recently with all of them now offering just 0.01 per cent on easy-access accounts.  

The market has been propped up by challengers and smaller building societies.

However, that has been largely in traditional savings accounts rather than Isas. A big part of this is that the latter require more red tape for providers to run and as such, have offered slightly lower rates, with fewer providers.

We’re now in new, unusual territory. The top rate for fixing for a year is 0.76 per cent. 

For two years, it is 0.85 per cent, both with relatively unknown Charter Savings Bank. 

Even the top three-year deal only pays 0.85 per cent.

This compares to 0.9 per cent easy-access offered by NS&I and its direct Isa. And even that comes with a huge asterisk – it doesn’t accept transfers in.

You can get 0.9 per cent from Cynergy Bank, which continues to be the only real competitor to NS&I. This does accept transfers in and it is likely to be sweeping up those who require a pot shift. 

If you want to beat this, you’ll have to fix until summer 2025 – all for an extra 0.2 percentage points with Shawbrook Bank. You can get 1.25 per cent, or 0.35 percentage points more, but that requires fixing for SEVEN years with the same bank. 

There is ever-dwindling choice for savers and this could be exacerbated further once NS&I drops its rate or pulls its Isa entirely.

The savings market has been hit by the coronavirus crisis which saw a cut to 0.1 per cent for the base rate, alongside the launch of a new funding scheme to pump cheap money to banks, and expansion of quantitative easing.

It may leave many scratching their head as to where to put their cash next – although, it seems at the moment, the answer for most has been NS&I, with record amounts of money pouring in.

Cash Isas vs stocks and shares 

These rates have crreated an incentive for people to choose stocks and shares Isas over cash for the long-term (personally, depending on your circumstances, I think a mix of both is good), but recent HMRC data shows that appetite has waned.

Around 11.2million adults subscribed to an Isa in the 2018/19 tax year, up from 10.1million the year before.

But the number subscribing to stocks and shares Isas fell by nearly half a million in the same period and it means the amount in cash swelled to 76 per cent of all Isa accounts, up from 70 per cent from the year before.

Although, 54 per cent of all money held in Isas is in a stocks and shares variety, compared to 46 per cent in cash, suggesting investors are far more likely to have built up bigger pots.  

Around £67.5billion was put into adult Isas in 2018/19, marking an increase of £2.3billion compared to the year before. This rise was driven by the upturn in cash, which increased £7.3billion.

Meanwhile, the amount of money stashed away into stocks and shares Isas fell £5.2billion in the same timeframe.

So, despite the low rates, cash Isas are proving popular once more – who needs an Isa season? Big banks, offering low rates, realise many are simply now not chasing rates, but looking for a safe port in a storm.

It is worth pointing out that the 2018/19 financial year did see a 4 per cent fall in adult Isa holdings.

However, there is still £584billion in them and the drop was down lower value of funds held in investing Isas. 

For every adult in Britain, there is an Isa with a five-figure sum in it, a remarkable stat.

The cash Isa has been a popular choice for savers for the last two decades, with limits that have risen far faster than inflation – you can tuck away £20,000 away from the taxman this financial year, compared to £3,000 in 1999 when Isas began.

What’s the point of an Isa?

Tax changes in 2016 mean that for most savers, cash Isas may appear to be fairly pointless compared to normal savings accounts, especially as they often offer slightly lower rates.

But for many, this tax-free wrapper is a crucial part of their portfolio.

Despite the tax-free savings interest allowance of £1,000 a year for basic rate taxpayers and £500 for higher rate taxpayers in non tax-free accounts now, an Isa can still be worthwhile savings option, especially long-term.

Money sheltered in an Isa will deliver a tax-free income, even above that £1,000 level and if you are building up a long-term pot, you may one day be thankful for that.

And who knows if the personal savings allowance will be around forever – it is much more likely to disappear than the Isa wrapper, especially given the fact the Government will be looking for ways to claw back savings itself thanks to the coronavirus crisis.

Many will simply opt for ease, and continue to hold a cash Isa where they have their current account, and suck up the low rates, with the thought of form filling, and moving money simply too cumbersome for a little bit of extra interest.

For that reason, banks are not likely to need to entice savers in anytime soon. They don’t owe savers anything, they play to market conditions. 

Case in point: Barclays revealed in results this week that £20.2billion of savings has poured into the bank in the first six months of the year, increasing its deposits by 10 per cent.

Santander saw deposits increase £7.9billion in the same timeframe. Barclays easy-access Isa offers 0.1 per cent and Santander 0.05 per cent. 

For some time yet, I don’t think there will be a rate chasing market for savers – but simply one where they look for easy access, ease of use and safety until hopefully something better blows along.

Will that be before 2025? I wouldn’t raid my piggy bank to bet on it. 

Despite Metro Bank’s tenth birthday just five months away, new chief executive Dan Frumkin didn’t appear to be in the mood for celebrations in late February.

Given the job on a full-time basis just a week earlier, having run the bank on an interim basis since January, one of his first acts was to detail to investors a truly horrendous year, which saw it lose £130.8million.

And Metro Bank’s network of 77 branches, or ‘stores’ as it labels them, which had been its physical embodiment and calling card for the almost 10 years it had existed on Britain’s high streets, were also in his crosshairs.

The branches ‘consumed capital and were a driver of fixed costs’, Frumkin wrote in a presentation to investors, they were ‘too large’, ‘not efficient’, had ‘high fit-out costs’ and ‘long leases, often without breaks’, and were ‘expensive to close’.

Frumkin, described as a restructuring specialist with a background at Royal Bank of Scotland and Northern Rock, appeared to forecast a very different future for the bank.

Plans to pour millions of pounds in hundreds of new branch openings were shelved, and instead he pledged a return to ‘sustainable growth built around a community banking model.’

But with the bank turning 10 this July, can Dan Frumkin restore Metro to profitability, and more fundamentally, does a bank built around large, expensive branches have a future in an increasingly online age?

The first bank in town and the banking ‘revolution’

Britain’s first new high street bank in 150 years was always going to attract attention.

But Metro Bank’s enthusiastic American co-founder Vernon Hill did his best to up the ante. 

The opening of its first branch in Holborn, London, on 29 July was the start of a ‘revolution in the banking business’, he said.

The bank would have 200 branches in London alone by 2020, they would be open seven days a week with long hours, they would be dog friendly, and would let customers open accounts in just 15 minutes. 

And those branches would be big, airy, spacious and bright, more akin to department stores than traditional bank branches.

‘We believe customers simply want a better experience from their bank, the kind they typically get from a great retailer and that’s what we intend to give them,’ fellow co-founder Anthony Thomson told the BBC on day one.

And in many ways, it succeeded. Customer satisfaction has always been high, and its offerings have always been competitive, if not the best.

Current account rankings from the Competition and Markets Authority have been published four times since August 2018, and Metro Bank has ranked second, first, joint-first and second, jostling with ever-reliable HSBC offshoot First Direct. 

Its online offering has also consistently scored well, despite its branch-centric brand.

It has around 2million personal banking customers, up from 200,000 total accounts in 2013 and half a million five years ago, who each kept roughly £2,150 in their accounts last year, although deposits were down nearly a tenth.

It has always paid fairly attractive rates on fixed-rate savings products compared to banking rivals, and offers fee-free debit card spending and cash withdrawals in Europe, although before 2014 this was the case worldwide, which hooked in plenty of customers. 

‘If you look at it from a customer’s perspective there’s nothing not to like about Metro’, Frumkin told This is Money. 

‘There’s the odd story here and there, we don’t get everything right, but the reality is the core ethos of seven-day a week banking is truly differentiated in the market.’

But one reason for that is that even in 2010, Britain’s biggest banks were already planning on moving away from thousands of branches nationwide, a trend which has become even more pronounced.

In the last five years, 3,588 bank branches have closed, according to Which?, and the new wave of challenger banks like Monzo and Starling have signed up millions of customers without bothering with a single branch.

‘Opening 70 plus branches in 10 years while the rest of the industry couldn’t close outlets quick enough has always been a strategy that I’ve struggled to get my head around’, Andrew Hagger, industry expert and the founder of personal finance site Moneycomms, said.

‘Its customer service is top notch and both business and personal customers no doubt like the flexibility of 8am to 8pm seven-day opening, but again that’s an additional large overhead.’

Frumkin admitted the bank ‘hadn’t been able to monetise’ the branch-first model but asked whether he believe the bank made a mistake in following that route, he remained firm.

He said: ‘Had Vernon known we were going to have a Bank of England base rate of 0.1 per cent, would he have made different decisions?

‘Probably, because this rate environment’s really difficult for a retail bank. I think he thought we would have a normal rate environment, and if the base rate were at 2.5 – 3 per cent, we really wouldn’t be talking about the size of the stores. We’d be making enough money.’

He added: ‘I think stores are a big part of how you build a bank. I’m not aware of anywhere in the world, including Asia, where a digital bank has become a full-service challenger to the incumbent banks.’

‘The number you need we could debate… I don’t think you need the density the bigger banks have, but I do think the stores are a physical representation of our service proposition, of the brand and of our culture. So we do need them.

‘If you look in a five-mile radius around the stores, digital account opening, digital activity increases dramatically. It becomes a beacon for what Metro Bank is.’ 

‘We can’t move away from who we are’

But successful customer service or not, the conversation is about the size, and cost. 

It’s an issue exacerbated by the coronavirus, which has led to a surge in online banking and banks reducing, rather than extending, their opening hours.

And as Frumkin’s February presentation made clear, cost-cutting is high on the agenda after its annus horribilis.

The bank was investigated after it was revealed in January that it had misclassified the risk of around 10 per cent of its loan book, which left it needing to raise £375million from investors. 

It had to pay investors 9.5 per cent interest to swallow a £350million bond issuance in October, it lost its chief executive, and it lost Hill, its driving force, chairman and co-founder. 

And this year it handed back £50million it was awarded as part of a £120million package to boost its business banking offering. 

After the £130.8million hole it has found itself in, Frumkin admitted there was a question of whether ‘Metro’s business model was so flawed that it should not remain as an independent bank and we should sell it’, but believes there is a road back to profit.

But that road is not lined with hundreds of new bank branches, with the bank slashing new openings from 71 to 24 over the next three years and, importantly, saying they would be smaller.

Instead, the bank will focus on growing customers around its existing branches, focusing on current account deposits at the expense of fixed-rate savings accounts, and diversifying its lending beyond mortgages, which made up 71 per cent of its lending in 2019, evidenced by the fact it is reportedly in talks to snap up the unsecured lending platform RateSetter.

‘The things we’re not very good at is unsecured personal lending’, Frumkin said, ‘overdrafts aren’t very good, small business lending isn’t very good, we don’t have an insurance product.

‘One of the dafter things I’ve said, is people go and buy insurance for their safe deposit box at a different insurer and they’re in our vault. Shouldn’t we do that?’

Not everyone is convinced. The share price remains stubbornly low at around £1.13, far below its peak of around £40 in 2018, and analysts are sceptical about the bank’s prospects.

‘Retail banking remains very low margin at a time when even the share prices of the big four UK banks are also at quite depressed levels’, Michael Hewson, of CMC markets, said.

John Cronin, an analyst at the broker Goodbody, said: ‘The business model can work if it can recycle the deposits it gathers through its very costly branch network into higher-yielding loan assets.’

But, in a briefing note recommending investors sell, he wrote: ‘Given its loan mix and substantial inflexible fixed cost base, there is no line of sight on profitability with base rate now sitting at just 0.1 per cent’.

But for all the talk of a future ruled by smartphone banks, Frumkin is adamant Metro Bank’s branches are likely to be a fixture on Britain’s streets for a long time to come. 

And not just because it can’t get out of the leases.

‘All the bits that we do well, local business managers, extended opening hours, dog friendly stores, all of that is still going to be who we are’, he said. ‘We can’t move away from that.’

Savers urged not to be fooled by tempting interest rates that will soon come crashing down

By Sylvia Morris For The Daily Mail

Published: 00:23 BST, 29 July 2020 | Updated: 00:23 BST, 29 July 2020

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

A decade of misery for Britain’s savers has been capped off by cuts to easy access rates which now mean that savers can get no more than £1 interest for every £10,000 saved at any of the High Street banks.

Barclays has followed HSBC, Lloyds Bank, NatWest and Santander in slashing the rate on its everyday saver today from 0.25 per cent to 0.01 per cent, a drop in interest of £24 a year.

The other major high street name, Nationwide Building Society, now offers an easy-access account which pays 0.01 per cent on up to £9,999, and just 0.03 per cent above that.

While the banks offer various accounts which pay higher rates, and other names like NS&I will pay more, the fact remains that it simply no longer pays to save into an easy-access account on the High Street.

In fact with inflation currently running at about 0.8 per cent, it not only doesn’t pay, it loses savers money.

All easy-access accounts offered by Barclays, Lloyds, Halifax, HSBC, NatWest, Santander and TSB pay an average of just 0.02 per cent, compared to a market average of 0.22 per cent, according to the financial information site Moneyfacts.

This marks a reversal from the same month a decade ago, when those same banks actually beat the market average on easy-access rates, as they needed money from savers after the financial crisis.

But 10 years of ultra-low interest rates, low cost Bank of England funding schemes and savers simply stashing money with their current account provider rather than finding the best deals has meant banks no longer need to pay savers decent rates to hold onto their money.

Savers save more but earn less

The decision by Britain’s biggest banks to cut the return on savings to record lows comes as Britons are saving more than they ever have before on the back of the coronavirus lockdown.

A record £56.6billion was saved in total between March and May as households were unable to spend during the lockdown, according to the Bank of England, while there has been a £43.3billion rise in the amount of money held in interest-paying easy-access accounts between January and May.

Some £814.6billion is now held in these accounts.

However, despite Treasury-backed National Savings & Investments and Goldman Sachs-owned Marcus Bank being inundated with billions in deposits over the last few months after offering best buy rates, the vast majority of that money has likely gone into low interest savings accounts offered by the biggest banks or even into bank accounts paying nothing at all.

Industry data provided exclusively to This is Money found nearly £4 in every £10, or £204.7billion in total, held with members of CACI, which include the UK’s biggest banks as well as challengers like Marcus, Ford Money and Shawbrook Bank, earned 0.1 per cent interest or less at the end of May.

And Barclays becoming the last of the UK’s major banks to cut its basic easy-access rate to a paltry 0.01 per cent is another reminder to savers that they need to move their money away from the high street.

‘We should note the savings ratio in the UK is increasing so people are clearly keen to save. Don’t play into the hands of the big banks, there are a lot more options available’, Kevin Mountford, the chief executive of savings platform Raisin UK, said.

Savers would earn £99 more a year in interest on £10,000 of savings with NS&I’s direct saver paying 1 per cent than they would with an easy-access rate of just 0.01 per cent. The account can be opened with just £1.

NS&I’s income bonds pay monthly interest at a higher rate of 1.15 per cent, while Yorkshire Building Society pays 0.8 per cent on £10,000, Saga 0.75 per cent on £1 and RCI Bank 0.72 per cent on £100.

Will big banks ever pay better rates?

And savers piling billions of pounds into low-paying accounts from high street banks might actually make it less likely that rates will improve in the future.

The UK’s biggest names already control ‘around 70 per cent of savings’, Mountford said, while research from the Financial Conduct Authority found much of savers’ money is held in accounts opened years ago, the interest rates on which have often been cut to close to nothing.

Banks therefore do not need to pay over the odds to attract savers given that they already have much of their money.

Mountford said: ‘In the UK we have high levels of apathy and inertia and need more savers to move from the big banks to better offers from others, noting that up to £85,000 of their money is just as safe’ under the Financial Services Compensation Scheme.

On top of that, the Bank of England launched its third low cost funding scheme for banks of the last decade on the back of the coronavirus outbreak, offering money to banks at close to its record low base rate of 0.1 per cent.

£18.7billion has already been handed out since April, and banks able to tap this will not need to pay savers 1 per cent for their deposits for as long as the money is available.

‘Whilst these schemes remain plentiful, easy to access and cheap there is very little incentive for the big banks, who are the main beneficiaries of these schemes, to offer better savings rates’, one senior banker at a challenger savings bank said.

‘It’ll be interesting to see if and how big banks are weaned off these schemes over the coming years.’

While the recovery of the economy and the return of healthy bank lending to business, mortgage and personal borrowers outside of government-backed loan schemes could lead to a need for more deposits, with record sums already held with banks it could be down for savers to vote with their feet if they want to see higher rates.

‘Opening a savings account typically takes less than five minutes. In many cases, that switch will mean at least £50 more in interest a year, and significantly more for higher balances’, the senior banker said.

‘If most people saw a £50 note lying on the floor, they’d take a few steps to pick it up. We need savers to do the same.’

Club Lloyds customers to earn less interest as Britain’s biggest bank is the latest to cut current account perks

• Account currently pays a blended interest rate of around 1.2% on up to £5,000
• This will be cut back to 0.8% from October
• Tesco Bank and Santander have announced cuts to their bank account perks as record low interest rates squeeze banks’ profits

By George Nixon For Thisismoney.co.uk

Published: 14:51 BST, 24 July 2020 | Updated: 15:01 BST, 24 July 2020

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.