More rates pain for savers

By SYLVIA MORRIS, THIS IS MONEY AND DAILY MAIL SAVINGS EXPERT
Updated: 05:15 EST, 4 February 2009

Savers rates have been cut to the bone by banks and building societies.

Scrape: Building Socities and banks have cut savings rates to the bone.

In the past few days the list of accounts where you earn a paltry 0.08% after tax (0.1% before) on substantial sums of up to £100,000 has grown.

These reductions follow the 0.5 percentage point cut in Bank of England base rate in early January.

Banks and building societies tend to move their rates at the start of the month following a base rate change, announcing them just days before they happen.

This time round some have shown no mercy to savers, cutting rates by as much as 0.6 points - more than the 0.5 point cut in base rate.

Savers in taxable accounts have been hit hard and need to move to better deals. They earn just 0.08% (0.1%) even on large balances in Abbey Flexible

Savings, Barclays Bonus Saver, Britannia Flexible Saver, Halifax Instant Saver, HSBC Instant Access, Lloyds TSB Instant Gold, NatWest Diamond Reserve and Nationwide CashBuilder.

Barclays Bonus Saver, closed to new savers, pays even less - just 0.04% (0.05%) in any month you make a withdrawal.

Among the worst notice accounts - where you have to give the bank or building society warning that you are taking out your money or pay a penalty - are Halifax 60 Day Gold, Barclays 30 Days and Barclays 60 Days Savings, all at just 0.08% (1%.) Nationwide CapitalBuilder is also a poor deal at 0.36% (0.45%).

Move your money straight away rather than sitting out the notice period. At a rate of 0.08%, you will lose just 66p in interest for each £1,000 moved out of the Halifax account.

And don't assume you earn a good rate in your internet account. Lloyds TSB pays just 0.08% (0.1%) on its Online Saver account and to some savers in its Internet Saver.

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Barclays esavings, Abbey eSaver and Halifax Web Saver all pay less than 0.4% (0.5%) to some savers. However, there are better deals on fixed rates - even if some of these have also fallen recently.

Of those on offer to new savers, the top one-year deals include Birmingham Midshires at 2.8% after savings tax (3.5% before tax) and, for those over 50, Saga paying 2.76% (3.45%) fixed for one year on a minimum £1 investment. Birmingham Midshires pays 2.76% (3.45%) for those wanting monthly interest on their savings.