Eight of the ten best-paying savings accounts have hidden restrictions, often meaning customers don’t make as much interest as expected.
Cynergy Bank and Vanquis Bank are the only two offering savers their returns catch-free, with their one and two-year fixed accounts, respectively.
Other banks in the top ten best buy table all include some kind of caveats. Close Brothers’ one-year fixed account, which offers 6.05 per cent, requires a minimum investment of £10,000 a year while First Direct’s market leading one-year fixed regular saver account, which offers 7 per cent, only allows savers to deposit between £25 and £300 a month – at a maximum of £3,600 a year. Savers must also already hold a current account with the bank.
Andrew Hagger of Moneycomms said: “When you look at the savings market, a number of the best buys have conditions or restrictions attached so they are limited in some way and not ‘clean’ easy access products.”
It comes at a time when bank bosses are to be questioned by the Financial Conduct Authority (FCA), on why their saving rates are so low despite the fact the base rates is now 5 per cent. No account can match inflation which is now 8.7 per cent.
Separate analysis of the top 50 instant access savings accounts for balances of £5,000 in May this year, commissioned by Investec, reveals that only 23 of the top 50 accounts don’t have penalties, restrictions for withdrawing money, or rely on short-term bonuses to inflate returns.
The research, conducted by Hagger, found that 18 of the top 50 instant access savings accounts limit the number of withdrawals customers can make while 13 charge interest penalties or reduce the rate paid to savers who make more withdrawals than their accounts allow.
Those locking away funds often get a better return, with the market leading two-year fixed account with SmartSave currently offering 5.95 per cent, however they face higher penalties.
For example, SmartSave customers must deposit a minimum of £10,000, something that will not be possible for many households in the current economic climate.
It is also the case that within two years, there will likely be more banks offering higher rates, so locking in may not get savers the best return.
Similarly, HSBC offers an online bonus saver account paying 4 per cent but this is only up to £50,000. The rate reduces to 2.3 per cent for deposits over that amount and no withdrawals can be made for a year.
It is not just fixed accounts that come with restrictions, easy access deals can also have caveats, including Barclays’ rainy day saver account which offers a return of 5.12 per cent.
Customers have to be a Barclays Blue Rewards customer, which accrues a £5 monthly fee, with the leading rate only up to balances of £5,000. After that it falls back to 1 per cent.
Principality Building Society’s online double access deal also offers 4.3 per cent, however, savers can only make two withdrawals per year and the second one will close the account.
Similarly, with Paragon Bank’s triple access saver offer of 4.25 per cent, there is a maximum of three withdrawals at this rate. Once you make a fourth withdrawal the rate drops to 1.5 per cent for the rest of the year.
Hagger added: “These elements are there to try to discourage customers from completely emptying their accounts. Sometimes the rate may look attractive while sitting close to the top of some best buy tables, but there are catches to be aware of – so always read the savings summary box before you sign up.”
There are things savers need to keep an eye on before committing to a bank account, Anna Bowes of Savings Champions said.
“In this day and age, if it looks too good to be true, it likely is. For example, it might be the case that you don’t have the access you expected to the account. In the worst case scenario, it could be a scam.
“Always check the terms and conditions of the account before opening it and compare the deal to the best buy table. It is up to the customer to understand what account they’re opening.”
