Boost for supermarket savers

By HELEN LOVELESS, MAIL ON SUNDAY ENTERPRISE EDITOR
Updated:

 

SAINSBURY'S Bank has given account holders a welcome boost by increasing the rate on its Direct Saver account to 5% and slashing the minimum opening balance from £2,500 to just £1.

The change puts the account in the top flight of savings providers that pay more than 5% interest.

The group today announced it was putting up the rate for savers by up to 1.45%. All balances will now earn a flat rate of interest of 5%, guaranteed until 5 January 2005.

It is welcome news for savers, who have begun to see savings rates rise in recent months, in line with the Bank of England base rate.

Sainsbury's has increased the rate of interest paid on the Direct Saver account by up to 1.6% since January of this year. Over the same period the base rate has gone up by 0.75%.

Yet less than 4% of all easy-access savings accounts, 15 in all, pay 5% gross or more regardless of the balance of the account.

Of those that do, many also have other conditions restricting eligibility for the top rate. For example, you may have to make regular monthly savings to qualify for the high rate. At the same time, the number of withdrawals that can be made may be restricted.

More disturbingly around 40% of all high paying easy access savings accounts rely on introductory bonuses to boost the rate over 5%. Once the introductory period has ended, savers could see the rate drop sharply.

Currently there are only four easy-access accounts offering a rate of 5% or more with no short-term bonuses or conditions, research shows. These include Scarborough BS (5.10%), and Alliance & Leicester's internet account (5.10%). Both can be opened with just £1.

Donald Jarvie, savings manager at Sainsbury's Bank, said it was committed to encouraging people to save, by offering 'consistently competitive' rates.

'Offering 5% interest on all balances for our Direct Saver account is the latest example of our commitment to maintaining this proposition as well as being an integral part of our initiative to Help Britain Save.'

Direct Saver account customers can withdraw or access their money at any time, without having to give notice. The account may also be run online or by phone.

For more information call 0500 40 50 60, or visit www.sainsburysbank.co.uk

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