Is the new SAGA easy access account a good or bad sign for savers?

SAGA has launched a new easy access savings account paying 1.40% and, while the rate is competitive, there are multiple other providers paying the same if not higher rates for these types of accounts. For example, the top easy access rate of 1.45% is available from three providers: Cynergy Bank (including a 0.70% bonus fixed for 12 months),  Marcus by Goldman Sachs (including a 0.10% bonus) and Virgin Money (with restricted withdrawals). There are then a further eight providers with rates from 1.40% to 1.44%.

Michelle Monck, finance expert comments on the new launch:

“Savings rates have taken a hit in recent months as many providers reduced their top rates on existing and new accounts. The launch of a new account from a well-respected brand such as SAGA will be attractive to savers. However, the hope that this may lead to other banks and building societies fighting harder for savings deposits and increasing rates may not materialise while base rates remain low and during a period of economic uncertainty.”

SAGA’s new account comes with a fixed bonus for 12 months of 0.25%. It’s not known if after 12 months SAGA savers will be able to renew their bonus, as Marcus by Goldman Sachs account holders have recently been able to do.

SAGA is using Goldman Sachs International Bank’s banking licence to operate this new account. Goldman Sachs International Bank is also using its licence for the Marcus by Goldman Sachs account, which means savers can only have Financial Services Compensation Scheme (FSCS) protection of a total of £85,000 across the two brands.

A new account to the market – and thereby more choice – is always welcome, however there are an increasing number of accounts that share a banking licence. For example, Monzo offers savings accounts operated by Shawbrook Bank, Paragon Bank and OakNorth and this is in addition to the large banking groups such as Lloyds Bank that covers multiple brands such as Halifax, Bank of Scotland and Scottish Widows.

Brands such as SAGA and Monzo bring savers convenience and a brand that resonates with them, however the shared use of banking licences could result in savers becoming confused about whether their funds are protected by the FSCS.

Accounts that come from brands using someone else’s banking licence also usually pay a lower rate of interest than fully licenced banks, including the one they are using to operate the account. For example, Monzo’s Easy Access Savings Pot by Paragon pays 1.15% versus 1.25% for the equivalent direct Paragon Bank account. Goldman Sachs International Bank provides the banking licence for SAGA with an easy access rate of 1.40%, while their own brand Marcus by Goldman Sachs pays 1.45%.