Why are so many banks still opening part-time? 

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.

Long queues: Customers are forced to wait outside branches as part of social-distancing rules

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’.

Some banks have turned customers away and told them to do their banking online

Some banks have turned customers away and told them to do their banking online

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.

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

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 

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.’

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Best current accounts: Halifax launches £100 switch offer

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.

Tumbleweed: It has been a barren wasteland in recent months when it comes to current account switch offers, as banks focused on existing customers amid the coronavirus crisis

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.

Those who switch to Halifax's Reward or Ultimate Reward accounts can earn themselves £100

Those who switch to Halifax’s Reward or Ultimate Reward accounts can earn themselves £100

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?

Switching figures collapsed between March and April as banks pulled welcome bonuses

Switching figures collapsed between March and April as banks pulled welcome bonuses

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.

The banks which have slashed rewards and interest in response to coronavirus
Bank  Old interest rate  New interest rate  Date of change 
Santander 123 account 1.5% on up to £20,000 0.6%  3 August 
Tesco Bank  1% on up to £3,000  0%  22 September 
Nationwide FlexDirect 5% on up to £2,500 for 12 months  2% on up to £1,500 for 12 months  1 May 
Starling Bank  0.5%/0.25%  0.05%  1 May 
Club Lloyds  1% on £1 – £3,999.99
2% on £4,000 – £5,000 
0.6% on £1 – £3,999.99
1.5% on £4,000 – £5,000 
1 October 

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.

Who did best in 2019? 

With switching data for individual banks now available for all 12 months of last year, here are the banks which gained the most switchers last year:

– Nationwide Building Society – ‭105,157‬

– HSBC – ‭63,635‬ 

– Monzo – ‭63,164‬

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.

THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS

Santander’s 123 Lite Account will pay up to 3% cashback on household bills. There is a £1 monthly fee and you must log in to mobile or online banking regularly, deposit £500 per month and hold two direct debits to qualify.

Santander

NatWest’s Reward Account pays out £5 a month in rewards if you pay out two direct debits a month of £2 each and log into mobile banking. The account comes with a £2 monthly fee and you must pay in £1,250 a month.

NatWest

Club Lloyds’s Current Account offers benefits such as cinema tickets, magazine subscriptions and dining cards to current account holders. There is no cost if you pay £1,500 each month, otherwise a £3 fee applies. Must hold two direct debits to earn monthly credit interest.

Santander

TSB’s Classic Plus Account pays 1.5 per cent interest on balances of up to £1,500. You must pay out two direct debits, register for internet banking and go paperless.

Nationwide

Nationwide’s FlexDirect account comes with 2% interest on up to £1,500 – the highest interest rate on any current account – if you pay in at least £1,000 each month, plus a fee-free overdraft. Both perks last for a year.

Barclays

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Billions pour into Premium Bonds lengthening odds of winning £1m

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

There were a record 1.745billion more Premium Bonds in this month’s prize draw as Treasury-backed National Savings & Investments continues to hoover up billions of pounds from Britain’s savers.

More than 6.2billion more £1 Bonds have been bought in just four months between March and June, with record low savings rates meaning savers may prefer to stash their money in the tax-free savings products in the hope of winning £1million rather than earn paltry interest rates elsewhere. 

Although the average prize fund rate is 1.4 per cent, which comfortably beats regular easy-access savings rates, many savers will end up winning nothing.

It also means that the chances of winning one of the two £1million jackpots have lengthened from around 40.5billion a year ago, to 46billion to one.  

NS&I is the sole remaining safe haven for savers after months of brutal interest rate cuts

Billions has poured into Britain’s best-loved savings product since the coronavirus lockdown left millions with spare savings at the end of each month, with Premium Bonds and other NS&I accounts being among the sole safe havens in an otherwise miserable year for savers.

Figures from the Treasury-backed bank reveal there were more than 6.2billion more £1 Bonds in August’s draw than there were in April, the last draw before Bonds bought in the first month of lockdown in March became eligible.

Bonds become eligible after they have been held for a full month, meaning the extra £1.745billion worth of Bonds in August’s draw were bought in June. 

Although the figure also includes reinvested winnings, with savers able to hold up to £50,000 worth of Bonds, it still suggests savers poured vast sums into Premium Bonds in June.

It is the largest increase in eligible Bonds since December 2006 and a record for any month with a normal draw, topping last month’s then-record increase of 1.698billion more Bonds.

Separately, figures from the Bank of England found households saved another £11.6billion in June, having already saved £57billion in the three months beforehand.

How savers have piled billions into Premium Bonds during the lockdown 
Month Total Premium Bonds in the draw New Bonds in the draw
June 2019 81,180,745,735
July 2019 81,646,957,120 466,211,385
August 2019 81,979,282,936 332,325,816
September 2019 82,518,577,254 539,294,318
October 2019 83,121,568,735 602,991,481
November 2019 83,678,794,092 557,225,357
December 2019 84,379,826,041 701,031,949
January 2020 85,042,266,956 662,440,915
February 2020 85,346,436,256 304,169,300
March 2020 86,147,886,134 801,449,878
April 2020 86,430,926,941 283,040,807
May 2020 87,664,243,494 1,233,316,553
June 2020 89,218,660,280 1,554,416,786
July 2020  90,917,241,141  1,698,580,861‬ 
August 2020  92,663,149,308  1,745,908,167 
Source: NS&I 

The number of new Bonds in the draw has increased every month since May, when there were 1.233billion more eligible Bonds than there were in April’s draw. 

In the 10 months between May 2019 and February 2020, an average of just over 500,000 new Bonds were bought each month, a figure dwarfed by the inflows seen over the last four months.

Treasury-backed NS&I revealed last month that £19.9billion of savers’ money was invested between April and June this year, after record cuts to savings rates left its accounts at the top of the best buy tables with very few alternatives.

As well as the Premium Bonds, its Income Bonds pay 1.15 per cent monthly interest, its Direct Saver 1 per cent and its Direct Isa 0.9 per cent.

Premium Bonds Winners

Prize Area Value of bond
££1,000,000 Cumbria £1,000
£1,000,000 Outer London £20,000
£100,000 London £3,000
£100,000 Hereford and Worcester £25,000
£100,000 Wiltshire £5,000
£100,000 Humberside £30,000
£100,000 Staffordshire £25
£100,000 Fife £37,500

More August 2020 winners

View list of August 2020 winners

NS&I announced it now holds £193.7billion and has been given the green light from the Treasury to raise as much as £35billion in 2020-21, nearly six times the £6billion it was originally supposed to raise before the coronavirus upended Britain.

But the increase in customers has also seen an increase in complaints. There were 2,384 in May, up from 1,433 the same month the year before, while 79 per cent of the 503 reviews left on the website Trustpilot are one star.

Several complain of call centre wait times of up to 40 minutes, with NS&I urging customers to manage their savings online during the pandemic if they can, saying it is receiving more calls than usual and taking longer to help customers.

August’s jackpot winners were a woman from Cumbria who held £5,900 in Bonds and bought the winning number a decade ago, and a man from outer London with a £20,300 holding who bought the winning Bond in June 2018.

Close to 3.8million prizes worth £108.1million were handed out in total in August by NS&I’s random number generator Ernie. Each £1 Bond has a 24,500 to 1 chance of winning a £25 prize. 

There are typically six prizes of £100,000 each month with a more than 1 in 10billion chance of winning, and 12 of £50,000 with odds of around 1 in 5billion.  

Savers who want to know if they’ve won can check with This is Money’s prize checker.

Fewer than 100,000 bank accounts were switched between April and June

Current account competition collapses thanks to coronavirus: More people moved bank in March than the next three months of lockdown

  • Just 98,192 accounts were switched between April and June – a 65% fall 
  • Banks closed accounts to new customers and withdrew switching bonuses 
  • Figures for the first three months of this year found Santander shed close to 30,000 accounts on the back of announced cuts to its 123 account   

The number of people who swapped bank account between April and June using the Current Account Switching Service fell by two-thirds compared to the first three months of the year, data shows. 

Just 98,192 accounts were switched through the official switch service in that three month period, fewer than around 113,000 who switched in March as the coronavirus outbreak pushed competition for current account customers into the deep freeze.

Almost all of Britain’s high street banks pulled switching offers, with three-figure welcome offers from HSBC and NatWest vanishing and the likes of First Direct and Tesco Bank closing their doors to new customers entirely as they focused on existing ones.

Closed for business: Banks closed their doors to new customers and withdrew lucrative switch offers in late March as they focused on existing customers amid the coronavirus pandemic 

Fewer than 30,000 switches took place in May and June and just 41,000 in April, figures from the service revealed.

Experts had previously said the bumper switch figure seen in March, the third highest on record, was likely down to high street banks announcing new overdraft rates of at least 35 per cent, with most charging 40 per cent and some as much as 49.9 per cent at times.

It is likely current account switching will remain low in the months ahead, as banks continue to focus on existing customers while squeezed profit margins limit bank account perks and welcome bonuses.

The paring back of current account benefits began before the pandemic.

Switching figures collapsed between March and April as banks pulled welcome bonuses

Switching figures collapsed between March and April as banks pulled welcome bonuses

For example, Santander announced in January that interest paid on its 123 account would be slashed by a third along with a cashback cap.

The bank shed close to 30,000 account switchers in the first three months of the year.

This was nearly three times as many account losses as it saw in the last three months of 2019, and it has since said it will cut the interest rate again in August to just 0.6 per cent.

Many of Britain’s biggest banks including Barclays, Halifax, Lloyds Bank and Royal Bank of Scotland also suffered losses in the thousands after the banks announced their new overdraft rates in the first few months of this year.

Nationwide Building Society, which registered its weakest switching performance in five years in the last three months of 2019 after it became the first to announce borrowing charges of close to 40 per cent, recovered somewhat in the first quarter of this year.

It gained nearly 23,000 switch customers, but its performance could suffer again in the future after it cut the 12-month introductory interest rate on its FlexDirect account from 5 per cent to 2 per cent in May, and said it would pay the rate on £1,500, not £2,500.

How current account switching collapsed this year 
Month  Total switches 
January 2020 71,361
February 2020  96,122 
March 2020  113,037 
April 2020  41,549 
May 2020  28,678 
June 2020 27,965 
Source: Current Account Switch Service 

HSBC was the biggest winner in the first three months of 2020, as it registered a net gain of almost 34,000 accounts on the back of a £175 switch offer, while Monzo, NatWest and Starling also recorded strong customer gains. 

HSBC has gained thousands of new accounts through the switch service since the start of 2018 thanks to lucrative welcome bonuses.

John Crossley, head of money at price comparison site Compare the Market, said: ‘The timings of this £175 offer, ahead of the pandemic, may have increased the number of people taking it up as people began to feel the financial effects of the worsening economic environment.’

Who did best in 2019? 

With switching data for individual banks now available for all 12 months of last year, here are the banks which gained the most switchers last year:

– Nationwide Building Society – ‭105,157‬

– HSBC – ‭63,635‬ 

– Monzo – ‭63,164‬

THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS

Santander’s 123 Lite Account will pay up to 3% cashback on household bills. There is a £1 monthly fee and you must log in to mobile or online banking regularly, deposit £500 per month and hold two direct debits to qualify.

Santander

NatWest’s Reward Account pays out £5 a month in rewards if you pay out two direct debits a month of £2 each and log into mobile banking. The account comes with a £2 monthly fee and you must pay in £1,250 a month.

NatWest

Club Lloyds’s Current Account offers benefits such as cinema tickets, magazine subscriptions and dining cards to current account holders. There is no cost if you pay £1,500 each month, otherwise a £3 fee applies. Must hold two direct debits to earn monthly credit interest.

Santander

TSB’s Classic Plus Account pays 1.5 per cent interest on balances of up to £1,500. You must pay out two direct debits, register for internet banking and go paperless.

Nationwide

Nationwide’s FlexDirect account comes with 2% interest on up to £1,500 – the highest interest rate on any current account – if you pay in at least £1,000 each month, plus a fee-free overdraft. Both perks last for a year.

Barclays

LEE BOYCE: Top cash Isa rates are falling fast, what next for tax-free rates?

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.

Sinking feeling: Savings rates are continuously diving to a point where some banks aren’t really offering them at all

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.

Bounce back: Until 2018/19, the amount held in Isas has been dwindling for a number of years, mainly thanks to the new Personal Savings Allowance

Bounce back: Until 2018/19, the amount held in Isas has been dwindling for a number of years, mainly thanks to the new Personal Savings Allowance

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.

Barclays revealed this week that £20.2bn of savings has poured into it in the first six months of the year. Santander saw deposits increase £7.9bn. Barclays easy-access Isa offers 0.1% and Santander 0.05%.

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. 

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.

What does the future hold for Metro Bank as it celebrates its tenth birthday?

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.

Smaller branch plans? Heather Small, lead singer of the 90s band M People, at a ‘party’ to celebrate the bank’s tenth birthday 

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.

Metro Bank co-founders Anthony Thomson and Vernon Hill at the opening of Metro Bank's first branch in London on July 29, 2010

Metro Bank co-founders Anthony Thomson and Vernon Hill at the opening of Metro Bank’s first branch in London on July 29, 2010

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.

Hill and Thomson said the bank, modelled on American fast food chains, retail stores and Hill's previous venture Commerce Bancorp, would launch a 'revolution'. It was Britain's first high street bank in 150 years

Hill and Thomson said the bank, modelled on American fast food chains, retail stores and Hill’s previous venture Commerce Bancorp, would launch a ‘revolution’. It was Britain’s first high street bank in 150 years

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.

How does Metro Bank rank for service? 

In the latest Competition and Markets Authority results for personal banking published in February 2020, Metro Bank ranked:

– Second for overall service quality

– First for online and mobile banking

– Second for overdrafts

– First for in-branch banking

And for business banking:

– Second for overall service quality

– First for online banking

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.

Customers and employees inside the bank's first branch in London on opening day. Metro has bet big on big high street bank branches, at a time when the rest of the banking sector was running away from them

Customers and employees inside the bank’s first branch in London on opening day. Metro has bet big on big high street bank branches, at a time when the rest of the banking sector was running away from them

‘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.

Hill initially claimed the bank would have 200 branches in London alone by 2020. It currently has 77, and plans to drastically slow the rate of branch openings to cut costs

Hill initially claimed the bank would have 200 branches in London alone by 2020. It currently has 77, and plans to drastically slow the rate of branch openings to cut costs 

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.’ 

Hill stepped down from the bank in 2019 after a truly horrendous year which saw it eventually record a £130.8m loss

Hill stepped down from the bank in 2019 after a truly horrendous year which saw it eventually record a £130.8m loss

‘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. 

New Metro Bank chief executive Dan Frumkin started in January, and has a job on his hands to right the ship

New Metro Bank chief executive Dan Frumkin started in January, and has a job on his hands to right the ship

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?’

Metro Bank has fixed-rate savings
Year Metro Bank one-year bond rate   Best buy rate  Market average rate
July 2013 1.85% 2.25%  1.68% 
July 2015  1.4% 2.07%  1.41% 
July 2019  2%  2.02%  1.33% 
July 2020  0.8%  0.91%  0.6% 
Source: Savings Champion (figures correct as of 24/7/2020) 

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.

But it plans to move away from more expensive fixed-rate deposits  
Year Metro Bank one-year Isa rate   Best buy rate  Market average rate
July 2013 2.25% 2.05% (Non-Metro rate) 1.83% 
July 2015  1.4% 1.75%  1.44% 
July 2019  1.55%  1.62%  1.3% 
July 2020  0.7%  0.76%  0.52% 
Source: Savings Champion (figures correct as of 24/7/2020) 

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’.

More than £7 in £10 lent out by Metro Bank last year was to mortgage borrowers. Its route back to profitability hinges on boosting more lucrative personal and business lending

More than £7 in £10 lent out by Metro Bank last year was to mortgage borrowers. Its route back to profitability hinges on boosting more lucrative personal and business lending

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.’

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.

Savers urged not to be fooled by ‘teaser rates’


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

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

Some accounts promise up to 1.45 per cent, but will be more than halved within weeks. 

The teaser rates come from little-known notice accounts which traditionally pay more interest than easy-access deals. 

Savvy saving: Some accounts promise up to 1.45 per cent, but will be more than halved within weeks

But you are required to give your bank or building society up to 120 days’ warning before you make a withdrawal. Some accounts allow savers to take their money immediately but there will be a penalty. 

This is often equivalent to how much interest you would have earned during the notice period. For example, on a 100- day notice account paying 1.35 per cent, the charge would be £37 on each £10,000. These accounts are popular with those who can plan withdrawals, many are disappearing as providers do not want to attract too much money in uncertain times. Harsh rate cuts also lie ahead. 

Ecology BS 90-Day Notice account now offers a top rate of 1.45 per cent — topping the best easy access deal with National Savings & Investment Direct Saver at 1 per cent and six times greater than the average 0.22 per cent. It also beats the 1 per cent from United Trust Bank. 

However, the notice account’s rate will drop on August 3 and again, on October 12. After the two cuts, the rate will have almost halved to 0.8 per cent. 

Melton Mowbray BS Online 100 Day Notice account pays an attractive 1.36 per cent. But the rate tumbles to 0.75 per cent on Saturday. On September 8 the rate falls again to 0.6 per cent, less than half its current offer. Family BS 35 Day Notice Saver offered 1 per cent on sums between £1,000 and £10,000 until tomorrow, when the rate falls to 0.45 per cent. On balances between £10,000 and £25,000 the rate halves from 1.1 per cent to 0.55 per cent. 

Manchester BS 60 Day Notice Saver falls from 1.1 per cent to 0.6 per cent on August 4. 

The rate cuts follow the Bank of England’s slashing the base rate to 0.1 per cent in March. The time lag is due to building societies taking longer than banks to pass on rate cuts to savers, as well as rules governing notice accounts. 

City regulator, the Financial Conduct Authority, demands good warning of rate changes is given. It means savers can take their cash without paying a penalty before the lower rate hits their pocket.

BANKS TO SLASH ACCOUNT PERKS 

Lloyds and Santander are slashing current account perks in October. 

Santander is doubling the monthly fee of its 123 Lite account to £2 from October 27. The bank is also reducing cashback paid on TV packages, broadband and phone bills, from 3 per cent to 1 per cent on its 123, 123 Lite, Private and Select accounts. Cashback on water bills is rising from 1 per cent to 3 per cent. 

It had already cut the interest rate on in-credit balances from 1.5 per cent to 1 per cent in May. This will drop again to 0.6 per cent in August. 

Lloyds Banking Group will also cut rates on Club Lloyds and Bank of Scotland Vantage accounts in October to 0.6 per cent on balances of £1,000-£3,999.99, from 1 per cent. Those with the maximum balance will earn around £24 in interest a year, down from £40.

                                                                                                                               Amelia Murray 

Millions of pounds withdrawn from Help to Save scheme between March and June


Piggy bank raid: Nearly £2m of withdrawals made by hard-up savers holding Help to Save accounts in just three months

  • Help to Save is a government scheme which pays out a bonus to eligible savers 
  • It is designed to encourage new savers to build up a fund over a four-year period 
  • Nearly £2m was withdrawn between March and June as those on lower incomes needed to tap the deposits to get by 

Hard-up savers withdrew almost £2million in three months from a tax-free government savings scheme aimed at helping those on low incomes build a rainy-day fund, official figures show.

Some 12,260 requests to withdraw money from Help to Save accounts, which pay a 50 per cent top-up of up to £1,200 over a period of four years, were made between the start of March and 5 June, with savers withdrawing an average of £155 each.

The figures came from a Freedom of Information request made to HMRC by the insurer Royal London.

Millions of pounds has been withdrawn from the government-backed Help to Save accounts since March, official figures from HMRC revealed

There were 175,000 accounts opened by the end of March with a total of £55million deposited.

It would indicate that around 7 per cent of all savers in the scheme may have tapped into the money to get by.   

‘The stats aren’t a surprise although, if you’d asked me to guess, I’d have gone for a figure higher than 7 per cent of accounts being accessed’, James Blower, industry expert and founder of The Savings Guru, said.

He adds: ‘The bad thing is that I expect that it’s probably more like 5 per cent of accounts accessed with most simply taking it all out to cope with the situation. 

‘I suspect that, if we did a similar request in three months’ time, the stats will be worse.’

The withdrawal figures are a blow given the scheme is designed to incentivise people to build up substantial savings by paying out a government bonus after two and then four years, but also demonstrate the impact the coronavirus crisis has had on the lives of those on lower incomes.

While Britain as a whole has been saving record sums over the last few months, close to 30 per cent of those £20,000 or less have seen their income reduced, according to the Office for National Statistics.

At the same time only around a third of those people believed they would be able to save money over the next year, the ONS found in June.

Those on lower incomes are likelier to have seen their income reduced due to the coronavirus and are less likely to be able to save over the next 12 months

Those on lower incomes are likelier to have seen their income reduced due to the coronavirus and are less likely to be able to save over the next 12 months

And research from the think tank the Resolution Foundation found 32 per cent of the second poorest fifth of households were saving less than usual during the crisis and a quarter had turned to borrowing to get by.

While the think tank’s George Bangham said Britain’s ‘wealth divides have been exposed by the crisis’, the lack of a safety net among those on lower incomes long predates the coronavirus.

Research from the Resolution Foundation found those on lower incomes were saving less during lockdown, while richer households saving more has contributed to record deposits

Research from the Resolution Foundation found those on lower incomes were saving less during lockdown, while richer households saving more has contributed to record deposits 

Launched in September 2018, Help to Save was one attempting at solving the endemic problem. 

It is open to those on Working Tax Credit or Universal Credit, provided they earned £604.56 from paid work in the month since they made a claim, and allows savers to put away up to £50 a month into a government account.

After two years the government pays out a 50 per cent bonus on the maximum amount saved over the period, up to £600. 

And after two more years, provided savers continue to add to their balance, they will receive another bonus of up to £600.

These rules mean those who withdrew money because they needed it in the short-term will see their bonus fall, as savers will not be able to put away more than £50 in the future to compensate for withdrawing money now.

Royal London’s Rebecca O’Connor said: ‘The proportion and size of withdrawals from Help to Save accounts indicates the extent that some low income earners have had to call on all available resources to get through the last few months.

‘Those who had managed to scrape together deposits in these accounts are no doubt disappointed they’ve had to raid them to get by during lockdown, as this money was probably earmarked for something else’.

THIS IS MONEY’S FIVE OF THE BEST SAVINGS DEALS



Best savings rates: Barclays becomes the last high street bank to pay just 0.01% interest


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.

Savers disappointed with the interest they’re receiving on their savings should switch

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.

How the UK’s biggest banks handed savers a decade of misery 
Easy-access rate  July 2010  July 2015  July 2019 January 2020 July 2020
Market average 0.74% 0.66%  0.63%  0.59%  0.22% 
Big bank average
(Barclays, Halifax, HSBC, Lloyds Bank, NatWest, RBS, Santander, TSB)  
0.76%  0.51%  0.26%  0.23%  0.02% 
Source: Moneyfacts 

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.

Don’t play into the hands of the big banks, there are a lot more options available 

Kevin Mountford, Raisin UK 

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?

How much have we saved during lockdown

Figures from the Bank of England have revealed there has been a glut of money deposited since the coronavirus shuttered the economy:

– March – £13.1bn

– April – £16.2bn

– May – £25.6bn

In total £56.6bn was saved in just three months between March and May

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.’

THIS IS MONEY’S FIVE OF THE BEST SAVINGS DEALS

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.

Best bank accounts: Club Lloyds to cut interest rate to 0.8%


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

Customers of Britain’s biggest bank will earn less interest from October, with Lloyds Bank slashing how much Club Lloyds and Bank of Scotland Vantage customers earn by around £21 a year. 

Both accounts currently pay interest on up to £5,000, paying 1 per cent on balances between £1 and £3,999.99 and 2 per cent on an additional £1,000, or roughly £60 a year in interest, for a blended rate of around 1.2 per cent.

But from October, Lloyds will cut that rate to around 0.8 per cent, slashing the interest rate on smaller balances from 1 per cent to 0.6 per cent and from 2 per cent to 1.5 per cent on the extra £1,000.

Lloyds has followed Tesco Bank and Santander in announcing cuts to its bank account perks

Customers can earn around £39 a year in interest if they keep the maximum £5,000 in their account after the changes come into effect.

Account holders earn interest if they pay out two direct debits every month, while the account usually comes with a £3 monthly fee if £1,500 isn’t paid in each month.

Lloyds has waived this fee between June and August, but those who don’t pay in that much could be hit with a double whammy of an account fee in September followed by an interest rate cut a month later.

Lloyds said in a statement: ‘Our Club Lloyds account continues to recognise loyalty through its range of benefits; including the recent introduction of free movie downloads throughout the year and exclusive access to cashback offers on mortgages and enhanced savings rates.’

However, those enhanced rates pay just 0.05 per cent on an easy-access savings account, more than a percentage point lower than the best available rate, and only if more than £25,000 is saved, and 1.5 per cent a year on a regular saver which allows account holders to stash away up to £400 a year.

The best regular saver on the market on offer to all is from Coventry Building Society, and pays 1.85 per cent on savings of up to £500 a month.

Some, including HSBC, First Direct offer 2.75 per cent, but only to existing current account customers.  

The bank added: ‘In line with the market, we have made some changes to the rates of credit interest and whilst we understand customers may be disappointed, we are confident the account still offers exceptional value for money.

‘Changes to the rate of credit interest have also been made to Bank of Scotland Vantage, which continues to give our customers credit interest as a free add-on.’

The banks which have slashed rewards and interest in response to coronavirus
Bank  Old interest rate  New interest rate  Date of change 
Santander 123 account 1.5% on up to £20,000 0.6%  3 August 
Tesco Bank  1% on up to £3,000  0%  22 September 
Nationwide FlexDirect 5% on up to £2,500 for 12 months  2% on up to £1,500 for 12 months  1 May 
Starling Bank  0.5%/0.25%  0.05%  1 May 
Club Lloyds  1% on £1 – £3,999.99
2% on £4,000 – £5,000 
0.6% on £1 – £3,999.99
1.5% on £4,000 – £5,000 
1 October 

Lloyds has become the latest bank in recent weeks to cut back the perks it offers to current account customers.

On Wednesday Santander doubled the monthly fee on its 123 Lite account to £2 and adjusted the cashback so customers earned less from TV and broadband bills and more from water bills, while earlier this month Tesco Bank said it would no longer pay customers any interest at all on their balances from September.

Santander’s £5 a month full 123 account will pay just 0.6 per cent interest on balances from the start of next month, down from 1.5 per cent earlier this year.

Banks were already paring back in-credit interest and cashback offers even before the coronavirus pandemic upended the UK, as a decade of low interest rates helped squeeze the margins of high street lenders.

This trend has only become more apparent over the last few months, with the Bank of England base rate now at an all-time low of 0.1 per cent and forecast to stay that way for the foreseeable future.

Nationwide and Starling Bank are among the other current account providers which have reduced the interest they pay to customers.

Lloyds has been one of the current account switching winners in recent times. 

It was the third most switched to bank for those moving account with the official service, behind Monzo and Nationwide Building Society, thanks in part to a £125 switch bonus it brought in last year.

THIS IS MONEY’S FIVE OF THE BEST CURRENT ACCOUNTS

Santander’s 123 Lite Account will pay up to 3% cashback on household bills. There is a £1 monthly fee and you must log in to mobile or online banking regularly, deposit £500 per month and hold two direct debits to qualify.

Santander

NatWest’s Reward Silver Account offers a £175 switching incentive to new and existing customers as well as insurance cover for European travel. Customers can also earn rewards which can be redeemed as cash or gift cards.

NatWest

Club Lloyds’s Current Account offers benefits such as cinema tickets, magazine subscriptions and dining cards to current account holders. There is no cost if you pay £1,500 each month, otherwise a £3 fee applies. Must hold two direct debits to earn monthly credit interest.

Santander

HSBC’s Advance Account offers £175 cash if you switch to it. The account comes with a £1,000 starting overdraft and 2.75% regular saver account. There is no monthly fee, however you must deposit £1,750 per month into the account.

Nationwide

Nationwide’s FlexDirect account comes with 5% interest on up to £2,500 – the highest interest rate on any current account – if you pay in at least £1,000 each month, plus a fee-free overdraft. Both perks last for a year.

Barclays