Chop and change: who’s the worst for cutting Isa rates?

New Which? analysis of 21 leading instant-access Isa providers has found a staggering number of rate cuts over the past six years.

Whether it is being wooed by a great rate that quickly disappears or providers that are offering below the Bank of England base rate, getting the best returns for savings and investments is difficult, particularly for savers who don’t have time to constantly hunt around for the strongest returns.

Which? analysis from April 2010 to April 2016 highlights the worst offenders, in terms of the most cuts overall as well as the most cuts per account. Our research focused on cuts for existing Isa customers and excluded cuts they would have known about when they took out the account, such as bonus rates expiring.

NatWest has the worst record on cuts-per-account, with eight cuts across two accounts over six years. Their e-Isa earned savers 2% in 2010 – or £204 for those who invested the full 2010 Isa allowance, but customers who haven’t moved their money will be earning a meagre 0.25% now – or just £25.50. This means consumers saving the same amount in 2016 as 2010 are £178.50 a year worse off than they were when they took their Isa out.

We also looked at the Isa accounts paying the stingiest rates to existing customers. M&S Bank’s Flexi Cash Isa was the worst culprit, paying customers just 0.05% since all of its 30-month bonus rates expired. Halifax, Lloyds and Santander all offer accounts with short term introductory rates fall as low as 0.25% if customers don’t switch away.

There is some good news for consumers; typically building societies have been more dependable: making fewer cuts over the past six years. Principality Building Society came out top having made just one cut across five Isas and West Bromwich continued to pay existing customers the  1.25% – 1.55% rate they signed up to, even though the accounts have now closed to new business. While Coventry Building Society deserves credit for rewarding existing customers, all of whom currently earn upwards of 1.5% on closed accounts.

Harry Rose, Which? Money Editor, said:

“Many savers simply want a provider they can trust to keep their Isa rate competitive. Too many banks are paying truly woeful rates of interest or are scissor-happy when it comes to cutting rates often penalising their most loyal customers.

“Our research shows savers who don’t want to have to keep moving their savings about should consider parking their cash with one of the more reliable building societies who have been better at not cutting their rates for existing savers.”

Advice on how to find the best cash Isas is available through Which?’s free How to find the best cash Isa Guide.


Notes to Editors

1.   In April 2016, Which? analysed 212 instant-access cash Isas from 21 banks and building societies to reveal: the worst offenders when it comes to rate cuts over the past six years; which accounts are paying loyal customers as little as 0.05%; where consumers can turn for a reliable return on their savings.

A full table of results is below. This table shows the rate cuts for existing customers of instant-access Isas from April 2010 to April 2016, including those closed to new business. We haven’t included expected cuts, such as bonus rates expiring or Isas that automatically mature into a different account after 12 months. Where necessary, we have assumed the customer took the Isa out in April 2010. Providers have been ranked by number of cuts per account. All figures assume savings of £15,000.

2.    Bank of England base rate has been held at 0.5% since 2009.

3.   NatWest e-Isa customers earned 2% in 2010 – equivalent to £204 a year if they invested the full Isa allowance of £10,200 in April 2010. If they haven’t moved their money, the same amount of savings would be earning just £25.50 a year today. Customers earned 2% in April 2010 before the rate was cut to 1.75% in March 2013. A year later, those customers were moved to the Cash Isa in the bank’s drive to simplify its range – the result was a rate-drop to just 1%, before three further cuts left savers earning a meagre 0.25%

4.   Natwest told us it no longer offer introductory ‘teaser’ rates or products such as the e-Isa that are only available to certain customers.

5.   M&S Bank defended its position, explaining that most of its customers chose to move to its instant-access or fixed-rate savings products after the bonus period. M&S also wrote to remaining Flexi Cash Isa customers last month to make them aware that they can switch to the Advantage Cash Isa (at 1.3%).

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