Nationwide, Santander, TSB and Virgin Money probed over ‘measly’ savings rates
An influential parliamentary body has expanded its inquiry into the low savings rates paid by the UK’s retail banks, describing the current rates on offer as “measly”.
Having investigated the UK’s four largest retail banks, MPs at the Treasury Committee have now sent letters to Nationwide, Santander, TSB and Virgin Money.
These lenders account for a quarter of all personal current accounts, according to the Financial Conduct Authority (FCA).
The MPs have demanded to know why the savings rates on offer at those banks are much lower than the Bank of England’s base rate.
According to the Treasury Committee, Virgin Money’s everyday saver account offers only 0.25 per cent. Santander offers 0.7 per cent and TSB 0.9 per cent.
While Nationwide offers the best rate, at 1.25 per cent, this is still far below the Bank of England’s base rate of 4.25 per cent. This is likely to be lifted by 25 basis points tomorrow.
MPs also asked how the banks “communicate with its customers… to make them aware of what could be more suitable, higher rate savings options”.
MPs and regulators have expressed concern that the retail banking market is not as competitive as it needs to be.
Last month FCA chief executive Nikhil Rathi said: “It is, and has been, standard practice for firms to offer more attractive rates to new savers, while leaving existing savers earning less competitive rates… firms should not be seeking to exploit customer inertia.”
The committee hopes that furthering the investigation will cajole banks into lifting rates.
It noted that when it began its inquiry into the big four retail banks in February, they offered between 0.5 and 0.65 per cent. Now, the big four offer rates between 0.7 and 1.3 per cent, but this is still way below the base rate.
Higher interest rates have boosted bank’s coffers with all of the big four retail banks recording bumper profits over the last few weeks.
Profit at Lloyds and Natwest increased by around 50 per cent in the first quarter while Barclays saw a smaller 16 per cent increase. HSBC’s profit meanwhile more than tripled, although it was boosted by a couple of one-off gains.
“The UK’s biggest banks are continuing to squeeze record profits from their loyal savers,” Harriett Baldwin, chair of the Treasury Committee, said today.
She said the committee was particularly concerned that “the loyalty penalty” would be particularly severe for “elderly or vulnerable customers” who might be less able to switch to online accounts.
“Consumers should continue to vote with their feet and find better offerings. This, more than anything, will drive the banks to increase their currently measly rates,” she said.
A Nationwide spokesperson said: “We continue to offer a strong and competitive range of savings products and as a member owned organisation we remain committed to paying the best rates we can sustainably afford. In recent months, our average deposit rate has been at least 42 per cent higher than the market average.”
A spokesperson for Virgin Money: “We offer a broad range of savings accounts providing choice for customers and have made regular increases to our savings rates to ensure we offer competitive and regularly market-leading options.”
TSB and Santander both confirmed they would be responding to the letter before the deadline.