Banks’ interest trick ‘robbing older savers’
A Daily Mail investigation has revealed how some of the biggest high street names automatically move savers’ money into low interest accounts.
Many receive just 0.08% after tax when high-interest bonds mature. It means savers receive a paltry £80 a year from their life savings.
If a bank switched them into equivalent accounts paying better rates, savers would rake in more than £2,000.
Nationalised Northern Rock, state-aided Halifax, and Britain’s biggest building society, Nationwide, are all known to use the practice.
Mervyn Kohler, special adviser for Help the Aged, said: ‘The banks always talk about building relationships but this is an example of a relationship that is totally one-sided. There are going to be people who don’t respond to letters from their banks and they shouldn’t just end up in the worst-paying account. It takes advantage of the customer relationship. It seems incidents like this happen with banks all too frequently.’
Vince Cable, Liberal Democrat Treasury spokesman, said: ‘It’s clear some of the banks are not looking after their customers in the long term. The good banks are treating their customers in a fair way, but some of them are taking advantage of pensioners in a way that is unacceptable.’
Fixed-rate bonds are a popular choice for many pensioners because they provide a regular income by giving a set rate of interest over a one or two-year period. But when the bond matures, some banks and building societies let the money roll over into ‘matured bond accounts’.
Most say they are not breaking any rules because they write to customers one month before the bond matures. However, critics of the practice claim many savers do not understand the complicated jargon used by the banks.
At Government- owned Northern Rock, a matured bond account pays just 0.2% interest. But the worst offender is the recently bailed-out Halifax, where a customer’s income could plummet by thousands within a few months. Customers who took out a one year bond with the bank paying 4.76% and maturing this month, could find their savings automatically dumped into a maturity account paying just 0.08% - a profit of £8 for every £10,000 invested.
Even if the money went into the bank’s simple instant access account, the interest would be just 1.6%.
One victim of the bank’s policy was 94-year- old Moira Osborn, who invested her life savings of £100,000 in its Guaranteed Reserve Bond, paying £450 a month interest.