Savers squeezed even tighter by account restrictions

Consumers looking to squirrel away the pennies are not only having to contend with low savings rates, but are increasingly facing restrictions on which savings accounts they are eligible for, according to analysis from MoneySuperMarket.

The comparison site analysed the top 25 cash ISAs and easy access savings accounts, and found that many providers place restrictions on their offerings, meaning that it is not always possible for consumers to benefit from the best deals.

The four highest paying cash ISAs all impose a restriction on who can access them. Customers looking to open up Coventry Building Society’s market leading Branch Instant ISA, paying 2.00 per cent AER will find they can only open this in a branch. First Direct offers 1.70 per cent AER, yet only allows instant access by transfer to another First Direct account. Similarly, Monmouthshire Building Society’s Cash ISA 6 and HSBC’s Loyalty ISA are restricted to those in certain geographical locations or those who are already existing customers. The highest rate available to all with no restrictions is from BM Saving’s ISA Extra (Issue 11) at 1.55 per cent AER.

It’s a similar story for easy-access accounts, with each of the top five accounts being restricted to either existing customers, by geographical location, or to those who can access their branch. The highest rate available to all is 1.40 per cent AER – significantly lower than the market leader which offers 2.10 per cent. From the 16 accounts which are deemed available to all, six still place restrictions on the number of withdrawals that can be made.

Kevin Mountford, head of banking at MoneySuperMarket, said: “It’s a tough environment at the moment for savers, and restrictions on accounts make it even harder for the majority of consumers to benefit from the best rates being advertised. Whether it is restricting the number of withdrawals being made from accounts, limiting account opening to existing customers or only allowing account opening within branches, providers are using a range of tactics to make their very best deals hard to access. Furthermore, bonus rates are not as popular as they have been in the past, with only a handful of providers offering them.

“Due to these restrictions, savers should consider it there’s a better deal to be had elsewhere. For many, the return on your money will be much higher in a current account than a standard savings account right now, and it is quicker and easier than ever before to switch to a new current account, so this could be a good option for some – though tax-free ISAs should still be the first port of call. It is also vitally important to keep a close eye on your account rates, as we have seen many providers reduce rates recently, despite a flat base rate, hitting savings returns further.”