Banks and NS&I wage war on older savers – block access to top rates

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This is yet another blow to older savers, who rely on the income they can generate from low-risk cash savings. They have received a near-zero return for more than a decade and now inflation is ravaging the value of their cash deposits.

The only consolation is that interest rates are finally starting to rise, and now it is possible to get savings rates of up to 3.5 percent.

On Thursday, September 15, the Bank of England is expected to increase interest rates again, which will feed through to higher savings rates.

Bank rate currently stands at 1.75 percent, but could increase to as much as 2.50 percent. Yet many elderly savers will not benefit.

That’s because nearly all of today’s market-leading savings deals are only available to customers who operate their accounts online or via their mobile phones, and many elderly savers are not comfortable doing that.

The new breed of “challenger banks” now offer by far the best savings rates, such as Charter Savings Bank, Ford Money and Shawbrook Bank.

Al Rayan pays a best buy 2.10 percent on easy access and United Trust Bank’s one-year fixed rate bond pays a market-leading 3.35 percent.

Less familiar names are paying more than 20 times the interest of many branch-based accounts from the high street giants, said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

Yet these accounts are typically only available online or via a mobile phone app, rather than telephone, post or branch. While many pensioners are now internet savvy, many still struggle or don’t trust the new breed of app-based savings accounts.

Coles said Al Rayan Bank’s deals have to be managed online, while Gatehouse Bank’s are only available online or via app. Atom, Tandem and Zopa are app-only banks.”

Some top competitive rates are exclusive to savings platforms like Raisin and Active Savings, which again, can only be accessed online, she added. “The most competitive one-year fixed-rate accounts right now are all web only, from banks including Charter, Close Brothers, Gatehouse Bank, Secure Trust Bank and SmartSave Bank.”

Savers who cannot get online or use a banking app rely on high street banks to offer competitive rates, but they are failing to do so. “High street savings rates have barely moved, despite the Bank of England hiking rates from 0.1 percent to 1.75 percent since December.”

The big banks prefer to take advantage of higher interest rates to boost their profit margins rather than reward loyal customers. “Savers who are hanging on for the high street banks to catch up could be in for a very long wait,” Coles added.

Anna Bowes, founder of savings rate tracking service Savings Champion, said all of the top five easy access accounts and fixed-term bonds must be opened online.

“Those who prefer traditional channels such as post, telephone or branch risk missing out.”

Yet Bowes said it is still possible to get a good rate from postal, branch or telephone accounts from Paragon Bank, Kent Reliance, Monmouthshire Building Society, Leeds Building Society and Darlington Building Society.

“Al Rayan and Charter sometimes offer a postal option.”

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Bowes said today’s top non-online account is Charter Savings Bank’s one-year fixed-rate bond. It pays 3.25 percent online or by post.

They key is to avoid the high street banks, which are nowhere to be found amongst the top rates, she added.

“Smaller banks are just as safe provided they are covered by the Financial Services Compensation Scheme, which protects the first £85,000 of your savings.”

Laura Suter, head of personal finance at AJ Bell, said even NS&I is pushing customers onto the web, as it aims to make 85 percent of customer transactions online in the next year.

“Just three of its seven account types can be opened and managed by post, blocking older people and those who aren’t digitally savvy risk from using the government’s savings service.”

NS&I’s Premium Bonds and Income Bonds can still be operated by post, but Green Savings bond, Direct Saver and Direct ISA cannot, although they can be managed via phone.

Becky O’Connor, head of pensions and savings at Interactive Investor, said: “As ever, shop around to find the best deal you can, whether you do that online or by post, branch or telephone.”

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