MSE News: Savers unwilling to switch despite paltry rates

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"Four out of 10 savers don't think it's worth switching because they wrongly assume all providers pay similar rates ..."

Read the full story: Savers unwilling to switch despite paltry rates

juicyjude

If by switching the return isnt that much more, sometimes the hassle of money laundering procedures, sending important docs through the post etc, just seems too much hassle. Also the process seems to take so long that sometimes delays in transferring the funds negates the extra interest rates. Just my opinion others may have differing views, although I do keep an eye on when my bonuses are due to expire.

Milarky

If savings providers weren't allowed to proliferate so many different accounts ('Liquid Gold' Symdrome) we might see an improvement. Of course having just a single account (the extreme example) locks all a bank's savers to the same rate. When they wanted to attract new savings they can't afford to because that would entail a 'disproportionate' increase in costs.

[Beware of what you wish for!]

You can't help everyone. So is it 'Moneysavingexpert' or 'Nannysavingexpert'?

poppy10_2

The examples given in the article are a little extreme - comparing a 0.1% account with the top savings account paying 2.9% (including a temporary bonus). In real life there is less likely to be that much in it.

To take a personal example, one of my savings accounts has £10,000, earning a pretty poor 1.5%. Yes, I could switch to the 2.9% Post Office account to get almost double the rate, but as a higher rate tax payer, the difference in interest earned after tax would be just £84. It takes a couple of hours at least to dig out all the paperwork you need from your old account, register for the new account and arrange the transfer of funds. Plus the same again after twelve months when the bonus expires and the rate plummets. It's really not worth the time or hassle for most people. It's not laziness or ignorance, just a valid decision to value your time appropriately

ChiefGrasscutter

Under the current system, as I have posted before, we the savvy savers benefit.
If such tactics by the banks/B.Societies we outlawed then overall rates paid to savers would have to decrease as no longer could those who couldn't be bothered to move their accounts be in effect subsidising the savings rates given to those that do move.

The circumstances outlines by 'Milarky' above actually existed in the 1970's. All savings rates were the same.
When a bank rate change was announced all the societies en masse changed their rates all by the same amount. There was in effect no competition.
The result of this.
Well savings rates were a few percent not unlike today when inflation was peaking at 20%+.

As the earlier posted accurately ended - be careful for what you wish for

Old_Slaphead

poppy10 wrote: »

The examples given in the article are a little extreme - comparing a 0.1% account with the top savings account paying 2.9% (including a temporary bonus). In real life there is less likely to be that much in it.

To take a personal example, one of my savings accounts has £10,000, earning a pretty poor 1.5%. Yes, I could switch to the 2.9% Post Office account to get almost double the rate, but as a higher rate tax payer, the difference in interest earned after tax would be just £84. It takes a couple of hours at least to dig out all the paperwork you need from your old account, register for the new account and arrange the transfer of funds. Plus the same again after twelve months when the bonus expires and the rate plummets. It's really not worth the time or hassle for most people. It's not laziness or ignorance, just a valid decision to value your time appropriately

£84 for HR taxpayer or around £120 for standard rate t/p - maximum 2 hours to setup and transfer (with online accounts it's more like 30 minutes). I think that's a pretty good return for the time invested (equiv to £70ph before tax).

IronWolf

poppy10 wrote: »

The examples given in the article are a little extreme - comparing a 0.1% account with the top savings account paying 2.9% (including a temporary bonus). In real life there is less likely to be that much in it.

To take a personal example, one of my savings accounts has £10,000, earning a pretty poor 1.5%. Yes, I could switch to the 2.9% Post Office account to get almost double the rate, but as a higher rate tax payer, the difference in interest earned after tax would be just £84. It takes a couple of hours at least to dig out all the paperwork you need from your old account, register for the new account and arrange the transfer of funds. Plus the same again after twelve months when the bonus expires and the rate plummets. It's really not worth the time or hassle for most people. It's not laziness or ignorance, just a valid decision to value your time appropriately

Its really not that complicated anymore. I recently transfered from HSBC to Santander, to get a 5% interest rate and £100 bonus. All I did was fill in an online form in 10 mins, and they arrange to switch over everything, direct debits etc.

All i do now is make sure I put £1000 in the account every month. I also opened a LLoyds vantage and Halifax saver, so once a month I send £1k from HSBC to Santander to Lloyds to Halifax. Takes about 5 mins but all those accounts have over 2.5% net interest compared to 0.2% or something pathetic on HSBC savings accounts.

PhylPho

No mention of it in Guy's piece, but fair do's: hats off to the AA.

The bulk of our savings have accumulated over the years in ISAs, so we only keep £6,000 as emergency "rainy day" instant access contingency in an online account.

We popped it into the then top-ranked AA Internet Extra Saver 12 months ago. That 'product' has indeed ended its lifetime, so has reverted to 0.5%, a fact the AA makes abundantly clear. But the AA is now offering Internet Extra Issue 4, which pays 2.6%. About which it says in a prominent announcement on its home page:

Existing savers

If you would now like to transfer your existing AA Internet Extra into our Issue 4, just call us on 0845 603 3358. We will transfer your account on the day you call.

We find that kind of conduct exemplary: it's been our experience with other providers that they'd rather you went off and grubbed aro;und to find a better savings rate elsewhere, rather than offering to ease you -- instantly -- into a decent account.

So OK, 2.6% doesn't rank in Guy's table as best-of-best. But I'm not about to mess around changing providers for the sake of so small a benefit (others here will be far better at doing the math than I am, so what's the difference on £6,000 for 12 months at 2.6% and £6,000 for 12 months at 2.9%???)

The MSE "Warning!" relating to 2010 Best Buys like the AA, Coventry, Santander and Ulster Bank says 'Check ASAP and ditch & switch'. That may be appropriate in some cases, but where we're concerned, ditching the AA and switching to a different provider is definitely not worth the bother.

Well done, AA, for notifying customers of the ending of one rate and allowing them instantly to transfer their funds to another account at a much higher rate.

* Have just done what I *think* is the math in my case: £6,000 at 2.6: £156 gross interest; £6,000 at 2.9: £174 gross interest. That's eighteen quid. Well, if I can't find that eighteen quid during the year from shopping savings, then I'm not much of an MSEr.

rdtrdt

ChiefGrasscutter wrote: »

Under the current system, as I have posted before, we the savvy savers benefit.
If such tactics by the banks/B.Societies we outlawed then overall rates paid to savers would have to decrease as no longer could those who couldn't be bothered to move their accounts be in effect subsidising the savings rates given to those that do move.

Exactly right.

It's not in the interests of us "rate chasers", who are prepared to put time/effort in to capture the best savings rates, for the public at large to also start rate-chasing. It might be better for them, but would come at a cost to us.

The system currently works OK as it is.

There is competition in the market to attract deposits from the pool of rate-chasers' savings. All anyone who wants a market-leading rate has to do is put in a modicum of effort.

For some people, particularly with more modest savings amounts, there's a limit to how much effort it's worth them making in order to chase rates. For example, a basic rate taxpayer with the "average savings" of around £2,000 could earn an extra £14.40 net by shifting from a 2% account to a market leading 2.9%. It's not surprising then that many choose not to bother - perhaps their time away from work is worth more to them than the very modest amount extra to be gained from continually monitoring savings accounts rates. That's a rational and justifiable decision.

Primrose

I do agree that sometimes switching accounts is too much hassle, especially when you take the amount of time involved in having to sort out all the paperwork.

The Money Laundering regulations have become a bit of a nightmare now, especially the way some financial institutions are interpreting them, and especially for people who don't have a driving licence, passport or who live in a care home and don't have utility bills addressed to them.

Why on earth can't the banking industry, with all the money they have floating around in their coffers, set up an industry-wide database so that once an individual has gone through the Money Laundering identification process, they are a permanent fixture on the database as far as identify is concerned. Then, at least, all you would have to do is to get your lifetime record amended if you move to a different address, or change your name because of marriage or divorce.

Surely it's not beyond the ability of some IT banking techies to devise such a system? Then you ought to be able to walk into any branch of any bank anywhere in the country with an updated record of your new address so that the national database is updated in a way that all financial institutions have access to it. I could undoubtedly earn a few pounds more if I were 100% fanatical about moving savings around. I do it fairly regularly when fixed term bonds expire, but as for savings accounts as well, it's sometimes just too much hassle.

SallySunshine

I certainly agree with you Primrose. The money laundering excuse is just that, criminals would know exactly how to get around that and it can be such a hassle sometimes .
Just over 2 years ago I opened 2 x 2yr fixed bonds on-line with 2 seperate building societies.

With one I was electronically verified in seconds, the other failed for no other reason than that it was a different system.
I was told I'd be able to open the account anyway, to send the cheque and I could get verified by sending the usual pile of stuff in.

I ended up having to send them everything but my shoe size, recorded delivery etc for passport. In all fairness they did send the passport back by the same method and the account was opened the moment they received the cheque.
It turned out o.k. in the end and ironically I have just reinvested my maturing funds with the B.S. that I failed electronic verification with.

However, if you can get similar savings rates. I'd certainly go with the quickest and easiest way when setting up accounts.