Banks swamped by a savings stampede
Experts say that anxious consumers have been cutting back on spending to put more cash into banks and building societies.
The biggest reason is thought to be the gravity defying rates paid by deposit accounts and the continuing financial turmoil that deters savers from putting their money into the stock market.
In the wake of the credit crisis, many financial institutions, struggling to obtain funding in the wholesale markets, bumped up savings rates to claw in valuable funds.
But these rates - now topping seven per cent for one-year bonds - have resulted in a stampede of savers eager to take advantage.
Financial Mail has seen a marked increase in complaints from readers about delays, hiccups and other problems encountered when savers open accounts. The office of the Financial Ombudsman says it has also noticed the trend.
‘The credit crunch has led to a bonanza for savers, with many high-interest savings accounts and cash Isa accounts springing up,’ says David Kuo, head of personal finance at the website fool.co.uk.
‘But providers of the most popular accounts can become inundated with new applications and this is where delays creep in. Consumers are advised to keep tabs on their cash, making sure it ends up in the right place and that all the interest they are owed is paid.’
Barclays has come under fire over how long it can take to open a Tax Haven cash Isa, paying 6.25% gross. The delays have led many savers to lose out.
Pauline Rutter applied for the Tax Haven Isa on April 7 on behalf of her husband Martin, 58, a pharmacist. But Pauline, 50, is less than impressed with the service she has received from the bank.
The account was not opened until earlier this month, even though Martin is a Barclays customer so no identity checks were needed. His cash was sitting in his Barclays current account earning a meagre 0.1% for one month while the bank dragged its heels.
Pauline and Martin have been told the interest on the Tax Haven account can be backdated only to 15 days after the application was made.
‘It’s unacceptable,’ says Pauline, who works as a secretary to a financial adviser in County Durham. ‘I applied for a cash Isa with online bank Egg on the same day and it was up and running immediately. If Barclays can’t cope with the demand, it should backdate interest to the date of application.’
Barclays has a history of poor service when it comes to offering attractive rates. It caused misery last year after the launch of its best-buy Tax Beater cash Isa at the end of the 2006-07 tax-year.
The account was so popular that the bank was unable to process applications by the deadline of April 5 and hundreds of savers lost their £3,000 tax-free cash Isa allowance.
Another Financial Mail reader who applied for Tax Haven last month and experienced similar delays was retired highways officer Mike Simmonds. ‘You would think Barclays would have learnt its lesson following Isa delays last year,’ says Mike, 69, from Uckfield, East Sussex. ‘I have lost out because funds were languishing in a current account while I was waiting for them to transfer into my Isa.’