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Access denied: Why some easy access savings accounts aren’t as ‘easy’ as you think

Paloma Kubiak
Written By:
Paloma Kubiak

Savers are seeing some enticing deals in the easy access market, but behind the headline rates there are more strings attached than you’d expect from these accounts. So, how easy are easy access accounts?

Out of the top 50 instant access accounts on the market for balances of £5,000, less than half (23) are completely ‘clean’, according to Moneycomms research commissioned by Investec.

By ‘clean’, this means they don’t have any penalties; restrictions for withdrawing your money or rely on temporary bonuses to bump up the returns.

Some of the top paying ‘clean’ providers include:

  • Chip Instant Access Account paying 3.82% AER
  • Investec Bank Online Flexi Saver paying 3.82% AER
  • Charter Savings Bank Easy Access (Issue 38) paying 3.68% AER
  • RCI Bank Freedom Savings paying 3.6% AER.

The firms revealed that 18 out of the top 50 easy access accounts limited the number of withdrawals savers could make, such as the Aldermore Double Access (3.85% AER) and the 3.88% AER Principality Building Society Online Double Access (Issue 2).

Meanwhile, 13 charged an interest penalty or reduced the rate for additional withdrawals above those allowed as part of the account rules. In the case of Aldermore, a third withdrawal sees the rate plummet to 1% AER.

Further, six accounts could only be opened by customers who hold a current account with the provider, such as the Chase Saver Account, while five provided savers with a short-term bonus rate. As an example, the Cynergy Bank Online Easy Access (Issue 61) offers 3.71% AER before reverting to 3.51% AER after 12 months.

Elsewhere, some savers may be surprised to learn they won’t be allowed any further withdrawals after using the maximum quota at four different providers, including Principality’s double and triple access accounts, while in one case (Leeds BS Limited Issue Online Access Issue 43), the interest rate drops after a year.

Overall, Investec said the ‘clean’ products have improved, standing at 23 in May compared to 22 in August 2022 and 20 noted in February 2022.

Interest rates have also risen sharply in that time with the average rate for the 50 market-leading accounts (as at 4 May) standing at 3.24%. This is more than double the average on 30 August of 1.48% and six-and-a-half times higher than the 0.5% on 21 February 2022. Since the research was conducted last month, rates have climbed even further.

What are the rules when it comes to offering easy access accounts?

A quick sweep of the ‘clean’ providers’ websites shows they explain easy or instant access accounts as:

“No penalties, tiered rates, fees or bonus/notice periods, easy access with unlimited payments and withdrawals” – RCI Bank.

For Charter Savings Bank, “easy Access accounts are just the thing for money that you need access to quickly. No fixed periods, no need to give notice, just a simple account where your money earns interest until you need it.”

On the regulatory side, when it comes to savings accounts, there doesn’t appear to be a set definition for ‘easy access’ which providers need to adhere to. But firms must communicate clearly where the rate of interest applies to a savings account and where it may change depending on whether certain conditions are met, according to the Financial Conduct Authority’s Banking: Conduct of Business sourcebook.

It states that in summary boxes for savings accounts, providers should give the name of the savings account, the interest rate that applies, explain where different interest rates may apply to different circumstance, and explain  how customers can access and monitor the reference interest rate.

They should also provide an explanation of how money may be withdrawn from the savings account, including any conditions or consequences for making withdrawals.

Within the communications and financial promotions guidance, the FCA sourcebook states: “If, for example, there is an uplift in the rate of interest on the condition that the banking customer does not make a withdrawal from the savings account, a firm should include in the summary box both a projection that assumes that the condition is met and a lower projection that assumes that the condition is not met.”

Further, the FCA handbook states that the summary box should indicate if the banking customer is required to provide a certain period of notice of an intention to withdraw money from the savings account.

“If interest to which the banking customer is entitled is reduced or extinguished, or if a charge is imposed, as a result of withdrawing money from the savings account, details of this should be included in the summary

Elsewhere, the summary box for the savings product should also indicate if it is a requirement to open the savings account that the banking customer holds another account or product with the firm.

The impact from the upcoming Consumer Duty

Meanwhile as part of the Consumer Duty to be implemented on 31 July by regulated firms, the FCA’s finalised guidance states: “Firms should ensure that key information is clear, visible and accessible – not hidden within a large volume of material, or hard to find on a website.”

“We expect firms to ensure they bring the most important information to the attention of consumers in an accessible way.”

YourMoney.com understands that firms need to communicate in a way that supports consumer understanding and equips them to make effective, timely and properly informed decisions. Therefore, firms need to ensure customers understand their products and services, at the point of sale and throughout the life of the product.

The FCA also said that when it comes to withdrawing funds from a savings account, customers shouldn’t face “unreasonable barriers”.

It gave this example of “poor practice”: A firm is increasing the interest rate on a savings product for existing customers, but it requires them to log-on to its website, access their account and find a page with a “discreet radio button” that needs to be selected for the increased rate to be added.

The FCA states: “The firm has designed this process as it knows through its behavioural analysis of its customers that many will not take these steps and therefore it will not need to pay additional interest to these customers.

“A firm acting in line with the Duty would use its behavioural analysis as evidence of the need for a simpler approach to support good outcomes, enabling its customers to easily obtain the increased interest rate.”

‘Easy to overlook the terms and conditions’

David Hunt, head of retail savings at Investec, said: “Savings accounts should be transparent and easy to use but unfortunately, as the analysis shows, too many are not and come with a range of terms and conditions which can be easy to overlook.

“Customers need to always look beyond the headline interest rate and check whether there are restrictions or penalties around accessing their money or whether their deal relies on a short-term bonus.”

Anna Bowes, co-founder of Savings Champion, said the phenomenon of restricted withdrawals in the easy access space has been around for some time after the FCA previously said accounts offering a bonus rate was a good idea. This is because it would encourage people to move their cash ahead of the rate dropping.

But as interest rates fell, providers didn’t want to pay more than they had to as it would tie them in to keep rates higher, and as a result, they had to think of “ingenious new ways to get publicity for being at the top of the tables but perhaps stretching the understanding of easy access”.

Bowes said: “I’m not against them as a restricted easy access account may offer a better rate, if it’s appropriate for you, but for others, it won’t be appropriate for their circumstances.

“But they are meant to be simple and savers have to be really careful to read the rules. If you don’t, you’ll either end up not having access to your money or not earning as much as you thought you would. You mustn’t just assume you know what it is.

“However, they do allow access to your money and the name of the account should indicate whether it is restricted in some way, such as ‘double access’ or ‘limited access’.

“But ultimately, it’s up to the saver to be on the ball. You have to read the small print, and choose an account that is appropriate for your activity. Consumer Duty should make things very obvious.”