Reading the wrong paper could ruin your savings

We all know savings rates are terrible right now, but small print means unless you read the ‘right’ paper you could end up even worse off.

Why? Well a frenzy of savings rate cuts took place at the start of this year, with more than 100 savings accounts affected.

To stand any chance of making a return, savers need to move their money when rates dive.

But it appears that some providers are exploiting rules about telling customers of changes, meaning account holders might not even hear when their savings are making an even lower return.

Vague rules

The wording about how providers communicate rate changes is vague. And different rules apply to different accounts.

For instance, providers are generally obliged to tell customers when they are cutting rates in “good time” and using a “durable” form of communication.

The Financial Services Authority (FSA) has clarified that in “good time” is understood to be at least two months in advance. Although with certain accounts, such as easy-access, in good time can be argued to be as little as 14 days.  

But what about a “durable” form of communication?

This became an important question when the Post Office recently cut rates on some of its online accounts, including its Online Saver Issues and Online Reserve accounts.

Cuts averaged 0.5 percentage points and were set to take effect on January 17.

But rather than writing to its customers to let them know, the provider, which counts savings as the largest part of its financial services repertoire, instead advertised in two papers on January 3 – the ‘Daily Telegraph’ and the ‘Daily Mail’.

Though the FSA said advertising in a paper alone doesn’t count as a durable form of communication in its book, a spokeswoman confirmed that in line with its terms and conditions on the Post Office savings accounts affected, it can choose to solely advertise rate changes in a paper. 

However, the provider did later email online customers but, many didn’t receive notifications until after 17 January – when the rate changes had already taken effect.

Anyone not reading those specific papers who hadn’t handed over their email details had little chance of finding out about the changes at all.

And what about the rule where providers are supposed to tell customers about rate changes at least two months advance?

A spokeswoman for the Post Office said: “We are taking steps to ensure that no customers are inconvenienced... We would like to take this opportunity to apologise to our customers who feel we have fallen below our usually high standards.”

Susan Hannums, director of savingschampion.co.uk, said: “In an age when information is readily and quickly available online and personal information can be sent easily electronically, at minimal cost, the process of displaying rate information in random newspapers is frankly antiquated. 

“Would providers use the same method if they were awaiting payment or requesting something from their customers?  It’s frankly a smoke and mirrors tactic that doesn’t help anyone other than putting money in the providers’ pockets.”

No communication required

In some cases, providers don’t even have to bend the rules to keep quiet when slashing rates.

The rules say providers don’t have to tell you if:

•    You have less than £500 in your account

Or

•    An annual change in rates is less than 0.5 basis points (there are 100 basis point in 1 percentage point )

Or

•    A change of less than 0.25 basis points happens at one time

As savings rates languish at all time lows, small changes in rates make a real difference between the top-paying accounts and those near the bottom of the tables.

Savers simply can’t rely on their provider to point out rate cuts and must scrutinise statements for rates changes.

Alternatively, you can use an online Rate Tracker service. This lets you enter account details and will send you and alert when a bonus or fixed-rate period is ending or the underlying rate changes.