Jeff Salway: Banks sit on millions, savers struggle
SAVERS wanting decent interest rates for their cash as the Isa season heats up won’t be in much luck if they turn to Scotland’s state-backed banks.
With the base rate stuck at 0.5 per cent for more than four years now and inflation set to climb again, long-suffering savers are in desperate need of cash returns that help protect against rising prices.
Individual savings accounts (Isas) offer cash savers the best chance of beating inflation, given their tax-free status. You would expect the high street banks to be competing for business as savers look to use their annual Isa allowance before the end of the tax year.
No such luck, however, especially north of the Border. Let’s look at the interest rates offered by the biggest banking names on Scotland’s high streets, brands that happen to be partially owned by the taxpayer.
At Bank of Scotland the best you’ll get, at the time of going to press, is a fixed-rate deal at 1.8 per cent and an easy access Isa at 1.75 per cent.
Lloyds TSB is offering a cash Isa at 1.75 per cent for those with more than £5,000 to deposit, and 1.45 per cent below that. However, even this derisory rate is bulked up by a bonus element of 0.75 per cent, which disappears after a year. The two-year fixed-rate Isa pays just 2.2 per cent.
With inflation expected to rise over the next two years you’d be mad to tie in for that long, especially for so little reward.
The story is the same over at Royal Bank of Scotland. It is currently promoting an e-Isa paying 1.75 per cent and an instant access Isa paying just 0.55 per cent.
That’s right, RBS’s instant access Isa pays an insulting 0.55 per cent. Anyone with money in that should move it without further hesitation.
If you’ve got a balance above £50,000 the state-owned bank will upgrade that to 2 per cent. That’s also the rate on the one-year fixed-rate Isa, with the two-year deal paying 2.25 per cent.
These pathetic deals are unfortunately typical of the cash Isas currently available, with Lloyds and Bank of Scotland actually among the better providers.
The average cash Isa rate has plunged from 2.55 to 1.74 per cent over the past year, according to Moneyfacts, largely because the Bank of England’s funding for lending scheme means banks and building societies aren’t dependent on cash deposits to finance their mortgage activities.
Savers are entitled to expect better, however, especially from the banks being propped up by taxpayer money. RBS, Lloyds and Bank of Scotland are sitting on millions of pounds of Scottish savers’ money and doing very little to earn it.
Millions of savers review their accounts at this time of year as their annual Isa allowance nears expiry. There are decent deals out there, if you look hard enough, although some involve locking your money away for a period.
Do yourself a favour if you’ve got a decent amount of cash lying around on deposit and an Isa allowance to use up – shop around and find a bank or building society that will at least try to reward your prudence.
The Scottish Government has been accused several times in recent weeks of taking its eye off the ball, distracted by the upcoming referendum from the day-to-day business of running the country.
Whether that’s the case across all functions I don’t know. But there’s certainly some substance to the claim when it comes to the financial issues affecting voters.
Take the “bedroom tax” for example, the cut in housing benefit facing thousands of Scots in council and housing association accommodation.
Anti-bedroom tax demonstrations take place across Scotland today, while the Govan Law Centre’s “no evictions for bedroom tax arrears” petition has secured nearly 5,000 signatures.
But any hopes that Holyrood would take a stand against this absurd Coalition policy by protecting tenants who fall behind on their rent because of the measure have proved ill-founded.
Instead it has been left to local authorities to step up. Dundee has led the way, pledging not to evict people hit by the bedroom tax.
The Scottish Government has also been left behind in tackling the scourge of claims management companies, which remain unregulated north of the Border. Action against pay-day loan firms has been similarly sluggish, although debate is ongoing.
Again it has been left to the individual cities to fight back against pay-day lenders by restricting access to information about pay-day lenders from their offices and libraries.
There’s clearly ground to be regained. But if the Scottish Government really has lost its focus consumers north of the Border will only be left even further behind.
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