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By DAILY MAIL REPORTER
Updated:

 

Guarantees can be worth their weight in gold for savers when interest rates are on the move. This month, leading savings institutions, including Halifax, Abbey National, Alliance & Leicester, Woolwich, Yorkshire Building Society and Portman, have all chipped away at the rate they pay some of their savers. And Nationwide shaved its rates last month.

The cuts come even though the Bank of England base rate has remained at 6% for nearly a year. These random cuts make accounts which come with a pledge linking them to base rate look even more attractive.

Linking your interest for a specific period in this way means you can rest assured your return will not be out of kilter with the general level of interest rates. But even with these accounts you need to check the rate is not harshly cut once the guarantee runs out.

This month, Lloyds TSB's guarantee on its tax-free cash mini Isa (Individual Savings Account) ran out - and it has not been replaced. Savers with the telephone-based Egg savings account have also seen the guarantee that they will earn at least the Bank of England base rate vanish at the beginning of this month, although the guarantee still exists on its account run exclusively over the internet.

Savers have not yet suffered a rate cut, but that does not mean they won't see their rates drift downwards in the future. Those in the tax-free Halifax Isa Saver have seen better treatment. The bank's original guarantee to pay at least base rate on £3,000 or more ran out at the beginning of January, and has been extended to 5 April next year.

Some banks and building societies have cottoned on to the fact that savers are fed up with the practice of launching top-paying accounts and then cutting the rate once savers have been lured in.

It was to put a halt to this practice that Money Mail launched Savings Watch two years ago. Since its launch, a growing number of new accounts come with a guarantee - and the guarantees are getting longer.

Chelsea Building Society's new Call-Direct second-issue telephone account guarantees to pay no less than 0.25% below base rate for two years. Savers now earn 6.05% (4.84% after 20% savings tax), excluding the 0.25% bonus payable for the first year on a minimum £2,500.

Saga Secure Savings Account, open only to savers aged 50 or over, comes with a similar guarantee but with no time limit, and pays 5.75% (4.6%) excluding the 0.75% bonus payable until August 1. They join Cheltenham & Gloucester's Tracker Account, which guarantees to pay no less than 0.25% less than base rate until January 2004 on £100 or more.

Coventry CallSave Instant carries a better guarantee - it will match base rate but it lasts only until September 30. Savers earn 6.05% (4.84%) on a minimum £5,000.

Birmingham Midshires' SimplySave telephone account and Northern Rock's Save Direct Base Rate Tracker also come with attractive guarantees. Birmingham Midshires' SimplySave, at 6.1% (4.88%), excluding a 0.4% bonus payable until July 1, comes with a guarantee that it will pay no less than 0.5% below base before tax ntil January next year on a minimum £5,000.

Northern Rock has recently replaced the expired guarantee on its tracker account. It now guarantees to pay no lower than 0.5% below base until next January. It offers 5.85% (4.68%) on £1 or more. The only drawback on these two accounts is that you are limited to a maximum of six withdrawals a year.

Maxine Bernard (pictured with her daughter Jessica, aged 12) opened a CallSave Instant account with Coventry Building Society last autumn, attracted by its good interest rate and its guarantee. Maxine, a business development adviser in Coventry, moved her money from a High Street bank where it was earning less than 2%. She says: ' I decided that there must be better interest rates around for my savings. I am now earning more than 6% before tax. I also like the convenience of the account, which I operate over the telephone. I can ring up and transfer money to and from my current account.'

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