COMMENT
The UK's Worst Savings Accounts

By Cliff D'Arcy
December 19, 2005

According to the Bank of England, UK residents had over £544 billion stashed away on deposit at the end of September 2005.

Sadly, much of this money is mistakenly salted away in a whole host of dreadful wrong accounts. In fact, when it comes to savings accounts, there are massive differences between Best Buys and "Don't Buys".

I won't go into detail about Best Buy savings accounts here, as I reviewed these just days ago in Super Savings Accounts Without Strings. However, here are twelve truly terrible accounts which are cheating savers out of stacks of interest!

(Based on a balance of £1,000; Moneyfacts database lists 547 accounts.)

Bank or BS	Account name	Gross annual interest rate on £1,000 (%)
Lloyds TSB	Reward Savings (13+ withdrawals a year)	0.10
Northern Rock	Instant Access (monthly interest)	0.20
Northern Rock	Instant Access (annual interest)	0.25
Alliance & Leicester	Instant Access	0.25
Citibank	Instant Access	0.35
Northern Bank (NI)	Saverplus	0.35
Prudential Banking	High Interest Deposit	0.50
Derbyshire BS	Derbyshire Cash A/C	0.50
Mercantile BS	Moneymaker Plus	0.60
Universal BS	Money Master	0.60
Universal BS	60 Day	0.65
Co-operative Bank	Cashsaver	0.65

Given that the Bank of England's base rate is 4.5% a year, these accounts fall well short of the mark. Indeed, even the best of these dirty dozen would pay pre-tax interest of just £6.50 a year on a balance of £1,000. After basic-rate (20%) tax, this falls to £5.20; after higher-rate (40%) tax, it's a pathetic £3.90. Yuk!

For the record, the above search revealed a total of 37 savings accounts which pay annual interest of less than 1% before tax on £1,000. Boo! On the other hand, you could earn upwards of £50 a year on £1,000 stashed away in a Best Buy account, which is at least five times as much as any of these 37 accounts would stump up. Naturally, the more that you have saved in one of these shockers, the more you stand to lose, so shun these awful accounts and switch your savings today!

Finally, what's rather sad is that five of the above twelve firms are mutual organisations, which means that they are owned by their customers. Although I'd fully expect the big banks (as public listed companies) to put their shareholders* first, I'm disappointed that so many building societies appear in this list. So much for solidarity and putting customers first!

More: Check out these superior savings accounts | Avoid paying interest with a 0% credit card!

* Cliff owns shares in Lloyds TSB.