Move your money now to avoid the bonus honey trap as easy-access savings rates plummet

By SYLVIA MORRIS, THIS IS MONEY AND DAILY MAIL SAVINGS EXPERT

Updated:

Savers need to move their money now to ensure they don’t get stung by the bonus honey trap laid by banks a year ago.

Big bonuses on accounts offered to savers 12 months ago are now coming to an end. If you don’t move your money, your interest could plummet from £300 a year to a miserly £25 before tax on each £10,000.

This time last year banks and building societies paid 2.4 per cent after tax (3 per cent before) on easy-access savings accounts. But they were boosted by huge short-term bonuses of as much as 2.16 (2.75) percentage points.

Bonus trap: The big bonuses typically ran for 12 months and they are starting to disappear

Bonus trap: The big bonuses typically ran for 12 months and they are starting to disappear

Big names such as Halifax, Santander and Nationwide lured savers in with these accounts. That was before the Government’s Funding for Lending scheme got under way. It offers banks and building societies a cheap source of money, and they have taken £17.6billion from the scheme.

As a result, they have turned their back on savers and no longer offer these top rates. The big bonuses typically ran for 12 months - and they are starting to disappear.

The clock started ticking from the moment you opened the account. But some, including those from Nationwide, run until a particular date. Whichever you are in, you need to check your rate and be ready to move.

 

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Anna Bowes, director at data analyst Savings Champion, says: ‘Bonus accounts on offer 12 months ago were great for savers who are ready to switch now. ‘But for those who stay, they are a trap.’

Although rates overall have fallen, you can still do much better than the 0.08 per cent (0.1 per cent) you will end up with if you stay put. Banks and building societies hope you will be too busy to check your rate, so they can use your money for next to nothing.

A recent report from City consumer watchdog, the Financial Conduct Authority, revealed the number of savers who get out of this honey trap is incredibly low.

Halifax Online Saver and Santander eSaver issue 5 see huge falls. With Halifax, you earned 2.24 per cent (2.8 per cent) if you opened an account before October 12 last year. But after 12 months in the account the rate drops to a pitiful 0.08 per cent (0.1 per cent).

 

Your interest almost vanishes from £224 after tax to just £8 on each £10,000 saved. In the Santander account your rate nose-dives from 2.56 per cent (3.2 per cent) to 0.4 per cent (0.5 per cent) — or £256 down to £40.

ING Direct, now part of Barclays, paid 2.4 per cent (3 per cent) for a year before the rate drops to 0.4 per cent (0.5 per cent). Natwest eSavings falls from the 2.28 per cent (2.85 per cent) paid to savers who opened an account between October 18 and 30 last year to 0.8 per cent (1 per cent).

Savers with branch-based accounts will also be hit. Halifax Everyday Saver paid 1.6 per cent (2 per cent) if you opened an account before November 10 last year. After a year you earn 0.4 per cent (0.5 per cent).

The interest for savers in Lloyds and TSB Easy Saver drops to a pathetic 0.08 per cent (0.1 per cent) from the ‘teaser’ rate of 1.28 per cent (1.6 per cent). Even your tax-free savings will not escape. Halifax Isa Saver Online wooed savers with as much as 3 per cent, but after a year you earn 0.25 per cent.

Its branch-based Isa Saver Variable paid an initial 2.75 per cent, now down at 0.5 per cent after a year. And Nationwide Online Isa Issue 3, on sale between February 17 and April 4, 2012, has paid savers a handsome 3.1 per cent tax-free ever since.

The rate dropped to 1 per cent on Monday. Its Online Isa Issue 4, on sale from June 1 to June 21 last year, also paid 3.1 per cent. But on Halloween, it becomes more trick than treat: falling to 1 per cent.

 
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