UK savers are base rate losers

As interest rates hit 5.5 per cent, the Post Office reveals that savers are missing out on millions of pounds in interest by sticking with accounts that fail to pass on rate increases.

The savers failing to benefit from the full 1.00 per cent increase in rates in the last year are customers of some of the biggest banks and building societies on the high street.

Today, the Post Office announces that its Instant Saver rate will rise to 5.75 per cent from 4 June 2007. Instant Saver customers will also benefit for even longer by a promise to pass on base rate rises in full until January 2010. This makes Post Office Instant Saver the UK’s best instant access savings account.

Savings rates paid by banks and building societies can quickly become uncompetitive when base rates increase. For example, a balance of £5,000 held in a typical instant access high street savings account would lose out on £145.00 in interest payments in the first year compared to an identical balance in a Post Office Instant Saver account. For balances of £10,000 or £25,000 losses rise to £276.00 and £660.00 respectively.

Post Office head of savings Richard Norman said: “It’s easy to become a base rate loser when account providers fail to pass on interest rate rises in full to their customers, leaving people hugely out of pocket.

“Interest rates have risen sharply over the last year, and many experts believe there are further hikes to come. As people tighten their belts due to rising mortgage payments, they should make sure any money they have in savings is working as hard as it can for them.

“The Post Office is proud to offer the UK’s best instant access savings account. As well as giving our customers the full benefit of interest rate rises until 2010, the Post Office Instant Saver also guarantees to stay within one per cent of the base rate for the life of the account.”