Taxpayer-Owned Banks Slash Savings Rates at Record Pace

Strategic Insights -

In a blow to savers, taxpayer-owned banks have slashed interest rates on savings accounts nearly seven times faster than the Bank of England, research has revealed. Among those cutting rates the quickest are NatWest, part of the bailed-out Royal Bank of Scotland, and Northern Rock, which was effectively nationalized in 2008. NatWest has reduced the interest rate on its popular e-Savings account by 3.38 percentage points in the past month alone, while the Bank of England's rate fell by half a point. Since October, NatWest has cut its rate by 5.02 points, compared to the Bank's 3.5-point fall.

Key Takeaways:

  • NatWest has cut the interest rate on its e-Savings account by 3.38 percentage points in the past month, while the Bank of England's rate fell by half a point.
  • Since October, NatWest has cut its rate by 5.02 points, compared to the Bank's 3.5-point fall.
  • Northern Rock cut the rate on its Save Direct Tracker by two points, despite the Bank of England's half-point cut.
  • 27% of variable rate savings accounts already pay interest of 1% or less, with one in eight paying 0.3% or below.
  • The Daily Telegraph's Justice For Savers campaign is calling for new tax breaks for pensioners hit by the sharp reduction in savings rates.
  • The Conservatives have promised to abolish tax on savings for all basic rate-payers and lift personal tax allowances for pensioners by £2,000 if they win the next election.

Statistics:

  • NatWest has cut the interest rate on its e-Savings account by 3.38 percentage points in the past month.
  • Since October, NatWest has cut its rate by 5.02 points.
  • The bank has received £20 billion in public funds since October.
  • 27% of variable rate savings accounts already pay interest of 1% or less.
  • One in eight variable rate savings accounts pay 0.3% or below.
  • The Bank of England is forecast to cut its rate by half a point to one percent on Thursday.

Sources:

  • The Daily Telegraph
  • Moneynet (www.moneynet.co.uk)
  • The Daily Telegraph's Justice For Savers campaign
  • The Chancellor (in reference to the Conservatives' £20 billion pledge)