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Increased public uncertainty over rates of interest paid on savings accounts

10-Sep-2009

- 13 million UK adults unaware of the rate of interest paid on bank accounts
- An increasing number of people are unaware of rates of interest paid

A growing proportion of savers do not know the rate of interest they receive on their deposits, according to new research1 from Investec Private Bank (‘Investec’). Its latest Savings Monitor reveals that more than a third (36%) of savers, or the equivalent of almost 13 million UK adults2, are unaware of the rate of interest they are earning on any of their bank or building society accounts. This figure is up from 32% six months previously3.

Investec believes that this confirms that there is now greater uncertainty among consumers about the rate of interest paid by banks and building societies on their savings accounts. It warns that this should be of particular concern to savers with larger balances (£25,000 or more) who typically receive a rate of just 0.95% gross AER4. This compares to the Investec High 5 Account5 which currently pays 3.15% gross AER6, 2.65% above the Bank of England base rate.

The findings show that the proportion of people who know the exact rate of interest they are receiving from their savings has also dropped over the last six months from 22% to 19% of savers. A quarter (25%) of savers know the approximate rate of interest paid on their deposits, says Investec.

Awareness of rate of interest on bank or building society accounts
Proportion of UK savers    
  Feb 2009 August 2009
Know the exact rate on all savings accounts 22% 19%
Know the approximate rate on all savings accounts 29% 25%
Know the exact rate on some savings accounts 5% 5%
Know the approximate rate on some savings accounts 32% 36%
Do not know the rate on any of their savings accounts 2% 2%

Linda McBain, head of Banking at Investec Private Bank said, “Savers have struggled to keep up with changing rates over the last few months as banks and building societies revise their rates to reflect earlier changes in the Bank of England base rate. It’s worrying that over a third of savers are unaware of the rate of interest they are receiving as those with bigger deposits could be missing out on hundreds of pounds in lost interest each year.

“With the average rate for larger deposits being just 0.95%, and many banks paying far less than the base rate, it’s crucial that savers move their money from poor performing accounts to those paying a consistently competitive rate.”

The research, which is part of Investec’s fifth six-monthly ‘Savings Monitor’ survey, reveals that 
38% or 18.1 million2 UK adults are saving on a regular basis, a decrease of 5.1 million people compared to six months previously3.

Savers from Scotland (28%) are the most likely to know the exact rate they receive on all their bank or building society savings accounts as opposed to just 4% in the North-East of England1.

Those savers aged 65 and over remain the most savvy savers with almost a third (31%) claiming to know the exact rate of interest on their accounts compared to just 14% of savers aged under 35 years1.

Linda McBain continues, “There are still a good number of attractive accounts for savers to choose from despite the low Bank of England base rate. However, it’s important that savers look at the promises behind the headline rate as some accounts make short-term rate promises while others are based on bonuses. Our High 5 Account tracks the average rate of the top five best-buy accounts, those paying the highest rates of interest, so savers are assured that their money is in an account paying a consistently competitive rate.”

The Investec High 5 Account, which requires a minimum investment of £25,000, pays a market leading rate because each week Moneyfacts take the five highest savings rates in the market, finds their mid-point and sets this as the rate for the High 5. This means that savers have the added assurance that the rate is set independently. Unlike other accounts, it does not rely on bonuses to inflate the rate.

To find out more about the Investec High 5 Account or Investec Private Bank’s other unique savings products, please call 0845 366 6333 or visit www.investechigh5.co.uk

Notes to editors:
1 Based on an independent online survey conducted by Research Plus on behalf of Investec Private Bank. A total of 1116 UK adults aged 18 and over were surveyed between 12 and 17 August 2009. 
2 Based on the number of adults aged 18+ in the UK, which is estimated to be 47,864,000, as sourced from the Office of National Statistics (ONS). The number of savers was estimated to be 35,407,000 based on 74% who said they saved regularly or less often, and 36% results in 12.8 million.
3 Based on an independent online survey conducted by Research Plus on behalf of Investec. A total of 1001 UK adults aged 18 and over were surveyed between 26 February and 5 March 2009. 
4 Investec Private Bank’s Savings Index tracks interest rates on savings accounts for balances of £25,000 using data provided by Moneyfacts. 
5 The rate of the Investec High 5 Account is based on the average of the top 5 savings rates published in the best-buy table on the Moneyfacts website www.moneyfacts.co.uk across the categories of no notice accounts, notice accounts, internet accounts, monthly interest accounts, accounts for the over 50’s and accounts with an introductory bonus. 
6 The rate is correct as at 9 September 2009 and is subject to variation. ‘AER’ stands for Annual Equivalent Rate and illustrates what the rate of interest would be if interest was paid and compounded once a year. ‘Gross’ stands for the rate of interest paid before the deduction of tax. Interest is paid or capitalised monthly or annually.