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The silent £4.7bn scandal at the heart of your savings account

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Slashing savings account rates for established customers is becoming increasingly normalised in the mainstream banking industry, Your Money can exclusively reveal.

An independent study, given to Your Money by Savings Champion, reveals that 35 per cent of savers have had the rate of interest paid out on their savings accounts reduced in the past three years, despite the fact that Bank Base Rate has not changed in that time. The average rate reduction was 0.46 per cent; Santander customers suffered the largest average reduction with an overall average fall of 0.69 per cent. The bank’s 1.86 per cent cut to its eSaver Issue 5 was also the largest single cut identified by Savings Champion.

Almost half (45 per cent) of these cuts may have been made without the saver being informed. Banks can covertly chip away at savers’ rates without consent or prior warning due to the exploitation of blindspots and exceptions in FCA regulations. Current rules allow for unannounced cuts of up to 0.5 per cent annually – as long as individual reductions do not exceed 0.25 per cent.

Savings Champion estimates that these cuts have cost savers a combined £4.7bn.

The research also notes that 43 per cent of savings accounts offered by high street providers pay less to existing customers than new ones, indicating that some existing savers are paying the price of cross-subsidizing more attractive rates on offer to new savings account customers and account switchers. At present, there is a dash by major banks to attract new savings balances; Your Money has reviewed some of these offers here.

It appears that such practices are becoming increasingly common in many major consumer sectors; earlier this month, the Competition & Market Authority revealed that the UK’s biggest energy suppliers consistently and unnecessarily overcharge, using the profits to bankroll low rates for new customers.

The table below details the findings in full.


Savings Champion’s research did, however, highlight one ‘saint’ among the sinners; Metro Bank. Metro Bank savings customers have never suffered from a rate cut – whether unannounced or revealed.

“Thousands of loyal UK savers are losing out as banks cut rates on savings accounts for existing customers, below the rates paid to new customers,” said Craig Donaldson, CEO of Metro Bank. “These cuts are often used to subsidise new higher rate accounts, in a bid to entice new savers – regardless of the fact that existing customers are losing out. No loyal saver should be penalised in this way.

“We find current FCA rules in this regard shocking, and firmly believe that banks should be obliged to let customers know personally about every rate change, and at the same time, inform customers of any better suited products available to them. Transparency will help to improve relationships between banks and consumers, and, in an industry where mistrust is rife, this is something that must be encouraged and supported by the FCA.”

“At Metro Bank, we’re proud of our Savings Promise, which ensures that should a better rate become available, our customers are automatically upgraded to that rate. Treating customers fairly must come first, and as an industry we must be committed to ensuring fair treatment for savers.”


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