JEFF PRESTRIDGE: Inflation is a pest… so banks must help savers

JEFF PRESTRIDGE: Inflation in a low interest rate environment is a financial nightmare for cash savers, so banks must help them out

Inflation in a low interest rate environment is a financial nightmare for cash savers. Like a mouse with cheese, inflation – now running at 5.4 per cent – nibbles away at the real value of saving, undermining the savings ethic and hitting the risk averse elderly the hardest. 

There’s little most hardened savers can do to counter this financial pest other than chase the best interest rates. Even then they’re not going to find any bank or building society prepared to pay anything near 5.4 per cent. 

Some braver souls – including many readers I speak to – have taken more decisive action, turning some of their cash savings into income-producing investments. It’s an understandable response, albeit one not without risk. 

Shrinking: Like a mouse with cheese, inflation – now running at 5.4 per cent – nibbles away at the real value of saving

What makes the situation worse for many entrenched cash savers is that a majority of those banks and building societies who look after their money don’t seem to care about their financial wellbeing – even when they have the perfect opportunity to give savers a little more. Disgraceful.

It is now five weeks since the Bank of England base rate was tickled up by 0.15 percentage points to 0.25 per cent. Five weeks in which savings account providers have had the opportunity to give customers a little more by way of interest. 

But the overall response has been lamentable, despite our decision last month to heap pressure on them by launching our Give Savers A Rate Rise campaign. 

Our stance is simple, fair and not particularly demanding: savers in variable rate accounts – especially easy access products where rates are notoriously parsimonious – should get the full benefit of the 0.15 percentage point rise. 

Bar a few notable exceptions, banks and building societies have refused to play ball. Profit making has been the order of the day with many savers enduring a version of Chinese water torture. 

Building societies Newcastle and Yorkshire both broke ranks last week – so hats off to them. Newcastle, the country’s eighth largest society, said that 97 per cent of members with a variable rate account would see their rate increase by 0.15 percentage points from the start of next month. It means rates on instant access accounts such as Easy Saver (Issue 3) and Easy Saver Isa will double to 0.3 per cent. 

Yorkshire is being less generous, stating it would add 0.1 percentage point of interest – not 0.15 – to a ‘majority’ of accounts where the savings rate is variable. Like Newcastle, the higher rates will kick in on February 1. Unlike it, Yorkshire has yet to identify which minority of accounts will not get the 0.1 percentage point rise. 

In Yorkshire’s defence, it does offer superior rates to many of its competitors, though it is wrong that its easy access cash Isa (Internet Saver Isa Plus Issue 9) pays an inferior rate to that offered on the equivalent non-Isa Internet Saver Plus Issue 9. It’s an anomaly that many readers have pointed out. 

As for big providers of savings accounts, the word procrastination should be embedded into their brands. On Friday, in response to enquiries about when they would be pushing up rates, delay and evasion were to the fore. 

Nationwide Procrastination Building Society said: ‘As you know, we are still working through what the base rate increase means for savers and will announce any changes in the near future.’

‘No update re [savings] rates,’ said NatWest Procrastination Bank. Lloyds was a little more forthcoming, stating it was still ‘reviewing’ what the change meant for variable rate savings customers (little in terms of more interest, I imagine). But it did confirm any changes would come into effect on February 1. 

HSBC said its savings accounts were not directly linked to the base rate – blatantly obvious if you put the piddling rate it pays on Flexible Saver (0.01 per cent) up against 0.15 per cent.

It added: ‘If there are any changes to interest rates, we will notify customers directly.’ Santander said nothing enlightening. 

Stop procrastinating and give savers a rate rise.