Are you being snubbed?

By STEPHEN WOMACK
Updated: 19:00 EST, 3 December 2000

A handful of banks and building societies are continuing to snub calls to bring their Tessa interest rates into line with rates on cash Isas. This is despite rulings from the banking ombudsman that savers in accounts no longer open to new investors, such as Tessas, should not be penalised.

Lambeth building society, for example, pays most Tessa savers 6.35%, while it pays 7.1% or 7.15% on cash Isas. Coventry building society's Tessa, while paying a generous 6.85%, still offers less than its Privilege Isa, which delivers 7.5%.

Alan Baynes, general manager of investments at Lambeth building society, defends the society's rates: 'Our Tessa rates have always been more than fair. Unlike others, we did not cut Tessa rates when Isas were introduced. Our Tessa rate has continually been equal to or more than the Bank of England base rate. It seems that our critics think it is OK to pay lower rates for all accounts, rather than higher, varying interest rates on different investments.'

However, other banks have bowed to pressure from savers. After more than a month of denying a need to change, Woolwich has equalised interest rates across its Tessas and Isas at 6.25%. Some Isa holders will suffer slightly, but it is an increase from 4.75% for most Tessa savers.

Divorcee Anne Rumble, 60, from Romford, Essex, says: 'I wrote to Woolwich asking them to pay the same on a Tessa as on an Isa. They fobbed me off, saying they didn't have to do this because they were different accounts. I am pleased they have changed their minds and are paying up. I don't want special treatment, just a fair rate.'

Woolwich will also make special 'goodwill' payments to those who wrote to complain about the poor return on Tessas.