You could call this a ‘golden era’ for the savings market as you can currently earn above 5% on the best deals, but not for those who put their savings in a high-street bank, new data reveals.
The ‘big five’ high-street banks continue to short-change savers, offering returns between 1% and 2% on easy-access accounts, amid numerous warnings by the FCA that they weren’t passing on base rate increases to its savings customers, Moneyfacts says.
More recently, the FCA shone a light on these lenders offering low returns on accounts no longer on open sale- under a mere 1%.
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James Hyde, spokesperson at Moneyfacts, says: “The FCA’s regulations around Consumer Duty directed financial services institutions to offer fair value and the big banks are still failing in some areas to meet those expectations.”
Which high-street lenders are still offering poor rates on their easy-access savings accounts, and would your cash be better off in a smaller bank?
What are high-street banks offering on savings?
New data from comparison site Moneyfacts reveals how much the big five high-street banks offer on their easy-access savings accounts.
| Provider | Gross rate on 10k balance |
|---|---|
| Barclays Bank | 1.65% |
| HSBC | 1.98% |
| Lloyds Bank | 1.4% |
| NatWest | 1.74% |
| Santander | 1.7% |
All providers are offering rates below 2%, whilst the current Bank of England’s base rate stands at 5.25%.
Santander slashed its easy-access rate some months ago from 2.5% to 1.7%- both rates still short changing savers compared to what’s currently on the market.
The rates contradict the wider movement in the savings market as we’ve seen smaller savings providers up their rates in recent days.
Hyde adds: “As always, it is down to customers to proactively monitor savings rates and switch if they feel their loyalty is not being adequately rewarded.”
What can I earn on the top easy-access savings account right now?
Hyde adds: “As always, it is down to customers to proactively monitor savings rates and switch if they feel their loyalty is not being adequately rewarded.”
What can I earn on the top easy-access savings account right now?
After 14 consecutive base rate hikes, savings rates reached a 15-year high last year, but mostly from small bank providers and challenger banks like Starling.
But since the BoE froze interest rates at 5.25% four times, MoneyWeek has seen savings rates fall as a result since November.
That said, in recent days some smaller providers have upped their rates on easy-access savings accounts:
- Paragon Bank increased its rate from 5.05% to 5.16% on 15 February.
- Virgin Money upped its rate from 5.07% to 5.11% on 19 February.
- Monument Bank increased its rate from 5.08% to 5.11% today (20 February).
Currently, you can earn up to 5.2% AER on the top easy-access saver account. Here are the top three accounts available.
| Provider | Rate AER | Minimum deposit | Withdrawals |
|---|---|---|---|
| Cahoot | 5.2% | £1 | Unlimited |
| Ulster Bank | 5.2% | £5,000 | Unlimited |
| Paragon Bank | 5.16% | £1,000 | Two withdrawals a year |
The top three are all small providers compared to your typical high-street bank. Though, some small banks tend to be owned by big lenders.
For example, Cahoot is a small division of Santander and Ulster Bank is owned by NatWest.
This compares to Paragon Bank which is its own entity.
Understandably, you might be sceptical about putting your cash in a small, less reputable bank, and you might be wondering if your money is safe with them.
Is your money safe with a small savings provider?
Your cash is safe as long as the bank is regulated by the FCA and protects cash savings through the Financial Services Compensation Scheme (FSCS).
The FSCS protects up to £85,000 of your savings should your bank or building society go bust.
You can use this checker to see if the bank you save in or are looking to deposit cash in protects funds with the FSCS or not.
Smaller banks that are divisions of high-street banks- such as Ulster Bank and NatWest- should be covered under the same FSCS protection.
If the bank you are looking to save your cash in is not protected by the FSCS, we would advise against depositing your savings in the account.
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