Customers of the Co-op bank have been given a one-week warning to move their savings or risk losing hundreds of pounds.
The bank is set to reduce the already disappointing interest rate available on its Smart Saver and Cash ISA from 1.81 percent to just 1.75 percent, which is less than the current rate of inflation at 2.2 percent.
Someone saving the average sum of £7,784 in one of these accounts would earn just £136 in interest over a year, however there are alternatives which offer as much as £397 – an extra £261.
Co-op justified the move on the basis that the Bank of England cut the base rate by 0.25 percentage point in August, bringing it down to 5 percent.
However, the decision means that any savings held in these accounts are actually reducing in value relative to increases in the cost of living.
Liz Edwards, money expert at finder.com, said people can protect their savings by switching away from poor value accounts.
She said: “Finder has been tracking the easy-access rates of 16 of the UK’s major banks since the base rate first came down in August, and so far, more than half (nine) of these banks have lowered the rates of their easy-access savings account products.
“Once the Co-operative Bank brings its rate down next Wednesday, this number will rise to 10 out of 16.”
She added: “Previous research from Finder has found that the average saver in the UK holds around £7,784 in easy-access savings accounts.
“The new Co-operative Bank rate of 1.75 percent would therefore earn the average easy-access saver just £136 over the course of a year, but for those who do their research, there are far more generous offerings available.
“Currently, Trading212 has a Cash ISA account which boasts a competitive 5.1 percent AER (variable). This would earn the average easy-access saver around £397 in interest in just one year, an additional £261 compared to the new Co-operative Bank rate.
“Households have been warned that the Autumn budget later this month will be ‘painful’ for our finances, so it’s extremely important to make sure your money is working as hard as possible for you.
“Small changes such as moving your savings into a higher paying account can offer significant benefits over time, and this could help bear some of the financial burden of the budget.”
