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Ella Mower

Senior Content Writer
Published: 14/06/2023
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Their responses cite current accounts and fixed products as higher-rate alternatives.

Four high street providers, Nationwide, Santander, TSB and Virgin Money, all defended their savings rates in letters published last week. This follows correspondence from the Treasury Committee in May which criticised the banks and building societies for seemingly failing to pass increases to the Bank of England base rate on to savers.

Harriett Baldwin MP, Chair of the Treasury Committee, described the way in which base rate rises were passed on to easy access savings accounts as “unusually weak”, saying “it’s clearer than ever that the nation’s biggest banks need to up their game and encourage saving”.

Previously, Barclays, HSBC, Lloyds Banking Group and NatWest Group were also questioned over the same issue. According to the Committee, the big four currently offer rates between 0.70% and 1.35% while the base rate stands at a near 15-year high of 4.50%.

Fixed rate alternatives

In their responses, Nationwide, Virgin Money and TSB each referenced their fixed term savings products as higher-rate alternatives for those who don’t need instant access to their funds.

“The market tends to offer higher rates for fixed term deposits because of the certainty and stability they provide,” said Debbie Crosbie, CEO of Nationwide BS. Its letter singled out its newly launched Nationwide Fairer Share Bond which offers existing customers a rate of 4.75% AER.

Crosbie went on to say that the rates paid by easy access products will typically be lower in order “to reflect that these accounts provide the highest levels of access”.

Meanwhile, Virgin Money’s response pointed towards its catalogue of fixed-rate ISAs which offer highly competitive rates. At the time of writing, its 1-, 2- and 3-Year Fixed Rate Cash E-ISAs each hold a top 10 position within our charts.

However, if it’s likely you’ll need instant access to your cash, this may not offer you much reassurance. Fixed rate bonds typically don’t allow you to make withdrawals, while fixed-rate ISAs tend to impose a loss of interest penalty to gain early access to your funds.

Saving with a current account

As another option, TSB, Nationwide and Santander all mentioned current accounts which can act as an alternative to a traditional savings account.

The Spend & Save current account from TSB is used as an example in its response. This account comes with a ‘Savings Pot’ feature which allows you to set and save towards a particular goal. A maximum balance of £5,000 can be saved in up to five Savings Pots per account. These Savings Pots currently pay a rate of 2.52% AER for 12 months, allow for instant access and don’t impose any withdrawal penalties.

Commenting on the Spend & Save account, Robin Bulloch, Chief Executive of TSB Bank, remarked that they had “been designed to encourage regular savings”.

Similarly, Nationwide highlighted its FlexDirect current account which comes with a rate of 5.00% AER for the first 12 months. However, this rate only applies to balances up to £1,500. While this current account doesn’t impose a monthly maintenance fee, it does require you to deposit at least £1,000 into it each month.

A third provider, Santander, also promoted two of its current accounts as easy access alternatives. Its 123 current account currently pays 2.00% AER on balances up to £20,000. Another option, the Edge current account, grants customers exclusive access to a savings account paying 4.00% AER (which includes a 0.50% variable bonus for the first 12 months).

However, these current accounts cost a monthly maintenance fee of £4 and £3 respectively. Furthermore, they require you to deposit £500 each month as well as have two active direct debits.

Rewarding loyalty

In a statement, Baldwin said that the Treasury Committee were concerned about consumers paying a penalty for their loyalty.

Nationwide’s response assured that it rewards loyalty by giving existing customers access to exclusive savings accounts. Furthermore, it provided details on its intention to distribute some of its profit to its members as part of its inaugural Nationwide Fairer Share payment.

“This comprises a £340m payment to reward loyal customers, who will receive a £100 payment in their account,” said Crosbie. Eligible customers are expected to receive the payment between 13 June and 30 June.


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