Savers lose confidence after reaction to rate rises

Millions of instant access savers are losing confidence in their chosen provider to pass on the benefits of Bank of England rate rises, according to a new study by Tesco Savings.

Fewer than one in three savers (30%) polled could say that their chosen provider had increased rates following the rise in May, and only a third (33%) are confident that they will get a higher rate for their cash following last week’s increase.

Nearly half of all instant access savers (48%) were even unsure about the rate their savings provider was giving them.

Jeremy Sutton, head of Tesco Savings comments: “It’s not surprising that savers are beginning to lose faith in some companies over the past few months. Recently, the numbers passing on the full base rate rise seems to be dwindling. Customers who choose an account that gives them immediate access to their money when they need it seem to come off worst.”

Over half of the people (56%) polled in the UK representative survey said they save regularly using an instant access account. The majority (85%) do so because they need to know they can get immediate access to their cash if required.

When instant access savers are looking for a home for their money, it’s not the highest rate that is of utmost importance to the largest number of people, but actually a combination of factors such as trust, convenience, instant access and good rate:

Combination of trust, convenience and good rate is most important (27%);
Convenience (23%);
Highest rate (22%);
Instant Access (17%).

Sutton continues: “We are committed to offering our instant access savers a combination of great value, convenience and instant access. That’s why since 2000 we have passed on the full benefit of every rate rise and have introduced regular promotions to reward our customers for choosing to save with us.”

The majority of instant access savers (85%) feel neglected by some companies in favour of others types of savers To help restore their faith, Tesco Instant Access savings is rewarding new customers who open an account by 14 August 2007 with an extra 1% gross/0.5%AER, above the standard rate, for six months from account opening.

The bonus is calculated on the daily cleared funds held in the account for the first six months that the account is open. It is applied to the account as part of the total interest earned at the next interest payment date following the end of the 6-month bonus period.

Tesco Savings is also continuing to pass on the benefits of the latest Bank of England interest rate rise to savers, with yet another rate increase of the full 0.25%.

New customers who open a new account before the 14 August 2007 will receive their additional 1% bonus on top of these new rates for the remainder of the six month period.

Sutton concludes: “The key to instant access savers getting the right account with the right attributes is to shop around. Make sure you know what rate you’re getting and what your company’s track record is like for passing on base rate rises. It’s also worth checking out if the provider has cut rates out with the base rate hoping you won’t notice. And, if you’re not satisfied with the answer, then it might be time to switch.”