The country’s big four banks last week announced roaring annual profits – a staggering combined £23bn. They rewarded shareholders for their loyalty by promising dividend payments in the coming weeks.
It was nothing but good news for investors in these banks – Barclays, HSBC, Lloyds and NatWest – although the party was soon spoiled as Russia’s invasion of Ukraine sent the banks’ shares plummeting.
But loyal savers – many of them elderly people who rely heavily on branches for their banking needs – have greeted their bank’s results with nothing but a sense of injustice and seething anger.
In safe hands?: Loyal savers only greeted their bank’s results with injustice and seething anger
In the banks’ race to restore post-pandemic profits, bolster their balance sheets, and keep shareholders happy, savers have been forgotten — or “lured,” as one reader bluntly put it in an email to me last week, after Barclays had posted profits of over £8 billion in 2021.
Despite two hikes in the Bank of England’s base interest rate since mid-December last year – first from 0.1 percent to 0.25 percent on December 16 and then to 0.5 percent on the third of this month – most savers are at the leading banks of the country have seen little of additional interest.
To use the same language as the above reader, their savings – their precious savings – are rotting away, eroded by inflation, which currently stands at 5.5 percent and is hurtling at a staggering knot rate of 7 percent. One wonders: Is this the brazen bank robbery of all time?
Yes, these savers could move their money, but many of them have no desire to transfer their savings to a brand they know little about. Some don’t want a pure internet savings account.
Maybe it’s age, but they trust their bank to do the right thing (my mom, for example, swears blindly that her bank NatWest can do no wrong). It’s a trust that’s being exploited by the banks.
After the first rate hike in December, The Mail on Sunday urged banks to give savers a rate hike. Yet the banks, more interested in profits and cutting industries like Forester on steroids, have refused to heed our cry. Only a handful of building societies and state-owned savings bank NS&I have passed nearly comparable rate hikes on to their savers.
Last week, Savings Champion, the country’s leading rates watchdog, sent out a list of savings institutions that have raised interest rates on at least one type of adjustable-rate account since December 16 last year. Only 47 out of 158 providers increased tariffs, but not on their entire range of variable accounts and not by the full 0.35 percent increase in the base tariff.
The notable exception is the Swansea Building Society. Starting Tuesday, it’s raising interest rates on its entire range of savings accounts — including accounts that are no longer available — by 0.35 percentage points. This means the new savings rate on his Instant Access and Cash Isa accounts will be 0.75 percent and 0.8 percent, respectively. On a savings balance of £10,000 this translates into equivalent annual interest of £7.50 and £8, compared to £1 in interest paid into equivalent accounts by companies such as NatWest and Lloyds (see below).
Savings Champion says the majority of vendors – 111 out of 158 – have done nothing but sit on their hands and rub their hands at the company for 73 days. Ching, Ching, more profit. They include some names you wouldn’t necessarily expect. Take Marcus, the Goldman Sachs account opened in 2018 to disrupt the savings market (it still pays a competitive 0.6 percent interest rate).
Among the 111 are Santander and the four largest banks Lloyds and NatWest – both bailed out by taxpayers during the 2008 financial crisis.
Eight days ago, Lloyds launched its new Drumbeat TV campaign featuring horses galloping through the suburbs. Its Director of Marketing Communications was moved to announce: “Our new Drumbeat advert brings our iconic black horse to the heart of everyday life, demonstrating our timeless commitment to families, businesses and communities across the UK.”
I’m sure many of Lloyds’ savers have already seen the candy ad and questioned the bank’s timeless commitment to them. A close friend who saw the ad and doesn’t usually comment on matters of personal finance summed up the ad fairly well: “Aesthetically pleasing fiction disguised as fact.” The banks’ refusal to give many savers a rate hike, after interest rates remained below 1% for almost 13 years, is described as “disgraceful” by Anna Bowes, co-founder of Savings Champion.
It also angers Baroness Ros Altmann, a campaigner for the elderly. She says: “Banks are making huge profits – and it is the ordinary saver who pays a heavy price for this profit recovery, as banks are narrowing the spread between the interest rate at which they lend and the interest rate they are willing to to pay savers is increasing.” Savers, Altmann says, are still being penalized by the easy money the Bank of England gave banks after the 2008 financial crisis to allow them to lend to businesses and stave off an economic collapse. This has been called quantitative easing.
She adds: “The banks got so much new money from quantitative easing that they didn’t need the money from savers. After so many years of suffering, any hope that thrift will finally be rewarded by rising interest rates has been dashed. Meager rate hikes have lagged far behind rising inflation, leaving savers losing real money month after month.
“It would be a welcome change if banks rewarded their loyal customers with much better savings rates as their profits soar, but I see no sign of that happening.”
Dennis Reed is Director of the Silver Voices Action Group for the Over 60s. He is scathing in his criticism of the banks. He says: “The obscene gains announced by the big banks in recent days disgust seniors like me who are beset on all sides by the unprecedented livelihood crisis.”
He adds: “Many retirees depend on interest on their savings to top up their state pension to cover daily needs. But now they have to watch those savings go down the drain as inflation soars and the interest they receive is beyond pathetic.’
Reed believes the Chancellor of the Exchequer should announce an unexpected tax on the big banks, funding an emergency increase of £500 a year in state pensions.
Savings Champion’s Anna Bowes says it’s “amazing” that only 30 percent of savings organizations have disclosed what they intend to do with savings rates in response to the two interest rate hikes since December last year.
In other words, 70 percent – 111 out of 158 – have done nothing for savers with an adjustable rate since the benchmark interest rate first rose 73 days ago.
She says: “Many people will assume that their banks and building societies will treat them fairly and pass on at least part of the interest rate hike. But that’s just not the case in most cases.”
Of the 4,529 variable rate accounts that Savings Champion monitors — both closed and open to new savers — Bowes says only 1,165 have benefited from a rate hike. Only 45 had a rate hike in response to both base rate increases.
Bowes urges savers to shop around for the best savings deals, although she accepts that many savers will remain loyal to their banks.
She adds: “Now is the time to move your money. As the cost of living continues to rise, savers need every penny they can get. Don’t reward your bank for bad behavior.”
Pathetic…the pathetic prices they wouldn’t even try to justify
Savers with money in easy-to-use instant accounts and tax-friendly cash Isa suffer the most from frugal interest rates.
Some have not benefited from the 0.35 percentage point increase in interest rates AND are receiving a pathetic 0.01 percent annual interest.
The Mail on Sunday called on all four banks to speak out about their contempt for these loyal savers amid rising profits and dividend payments to shareholders.
As you can see, NONE of the banks answered the question of how such poor interest rates could be justified given their 2021 profits.
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