With inflation on the rise savers are having to work extra hard to try to get a real return on their money.
Unfortunately, one group of savers are finding themselves at a disadvantage in the battle for the best interest rates. A divide is growing between the rates offered to people prepared to bank online and interest available on traditional accounts.
There is a “growing trend that means those seeking the best rates for their savings must be online,” said Nina Montagu-Smith in The Times.
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At present the top five rates available on five-year fixed rate accounts are online-only, for one and two-year rates four of the top five are only available online. Banks are able to offer higher rates on online-only accounts because they have lower overheads for those accounts.
The growing disparity between online-only rates and traditional accounts is hitting pensioners particularly hard as they are the age group least likely to be online.
“Low interest rates over recent years have had a significant effect on older savers, who often rely on a modest nest egg to provide a cushion against the unexpected,” said Caroline Abrahams, charity director at Age UK, in The Times.
“The shift online has meant that the more than 4m older people who are not online are locked out of the best interest rates, while people who are not in a position to switch regularly often find themselves on older products with dwindling returns.”
The latest blow has been delivered by NS&I. The Treasury-backed bank has announced that its new NS&I Investment Guaranteed Growth savings bond, paying 2.2 per cent over three years, will be only available online.
It is the first time NS&I has offered an account that was online-only, but it’s been met with criticism that it undermines the very aim of the bond – to help “hard-pressed savers” as the Chancellor said in his Budget.
Former Pensions Minister Baroness Ros Altmann told the Daily Mail it is “shocking” that millions of older people will be excluded from getting the account. “I’m disappointed. Many older people live alone, with no computer access,” she said.
How rates compare
The best possible rate available on cash at the moment is Ikano Bank’s five-year bond paying 2.35 per cent. Unfortunately, it’s online-only and the best available rate drops to 2.2 per cent if you want any other way to access your account. That rate is offered by Shawbrook Bank on its five-year bond, which can be operated online or by post.
Yorkshire Building Society has the best instant-access rate with branch or postal access at 1.15 per cent. But, that rate includes a 12-month bonus and it falls to a pitiful 0.5 per cent after a year. RCI Bank has the best rate without a bonus 1.1 per cent, but it’s online-only. If you want other ways to access your account, and not to have to move your money again in 12 months, you’ll have to settle for one per cent from NS&I.
