By 
Some of Britain’s biggest banks are shortchanging loyal savers by paying less interest than the Bank Rate on their cash.
A Telegraph Money investigation has found hundreds of high-profile accounts returning 0.75pc or less, well below the market average. Major brands including Barclays, HSBC, Lloyds Bank, NatWest and Santander currently offer accounts paying paltry rates to consumers. Some return as little as 0.2pc interest on balances.
One account, now closed to new customers, was found to pay interest of just 0.09pc.
Data compiled for this newspaper by Savings Champion, the advice site, found that 50 actively marketed accounts paid 0.75pc or less. A further 246 accounts are closed to new savers but also pay low rates to existing customers.
Many of these are "maturity accounts", where a saver’s cash has been transferred by their bank once a more attractive fixed-rate period has expired.
Having been tempted with a best buy rate, these customers now find their cash languishing in accounts paying far less than the average.
Even in today’s low interest rate environment, leaving funds in these Isas could be costing savers hundreds of pounds each year compared with using the top accounts.
Of the Isas currently open to new customers, NatWest and Santander were guilty of offering the lowest rates. NatWest’s Cash Isa has tiered interest rates and pays just 0.2pc for balances up to £9,999. A saver would need to have £50,000 or more deposited in order to beat the Bank Rate, with balances above this amount earning 0.85pc.
Santander’s Easy Isa offers a rate of 0.2pc on all balances up to £39,999. This means a customer with £20,000 saved would earn just £40 a year.
Savers could generate several times this amount from rival providers. The current best buy account is the Coventry Building Society Cash Isa, which pays 1.5pc to savers. Over a year the same £20,000 balance would have generated a £300 return – £260 more.
Anna Bowes, of Savings Champion, said: "Savers need to be vigilant about where their cash is deposited – or is languishing – as there are often terms and conditions that could leave savers earning far less than they should be.
"The big high street banks depend on your loyalty and the strength of their brand, which allows then to pay some of the worst rates available."
Other major accounts returning less than the base rate include the Barclays Instant Cash Isa (Issue 1), which pays 0.6pc on balances up to £29,999. Elsewhere, the Lloyds Bank Cash Isa Saver offers a paltry rate of 0.35pc.
But it is not just major banks that leave savers short-changed. Building societies and so-called "challenger" banks are also guilty.
The Principality Building Society Variable Rate Cash Isa also returns 0.2pc to customers.
Penalising loyalty
Even vigilant savers may believe they are enjoying a competitive rate when the reality is quite different. Some banks have branded their Isa as "loyalty" or "premium", suggesting a better than average rate.
"These Isas might pay a little more than other accounts that the provider offers – but it may still be very uncompetitive compared with the best rates available," said Ms Bowes.
"For example, the HSBC Loyalty Cash Isa pays a standard rate of 0.55pc. The loyalty bonus that ordinary current account customers can receive is 0.1 percentage points, which applies for 12 months following a deposit into the account – making the total rate 0.65pc. This falls well below the best easy-access cash Isa."
Ms Bowes said accounts that have offered attractive interest rates when they were opened often now gave significantly lower returns, penalising the most loyal customers.
For example, a customer opening the market-leading Post Office Online Isa Easy Access (Issue 3) in January 2016 would have enjoyed one year with a 1.51pc interest rate. However, this dropped to 0.86pc when the initial 12-month bonus period expired. The rate was then cut again, to 0.5pc.
Older accounts that are now closed to new customers typically have the worst rates of all. The Co-op Bank’s Tessa Deposit account pays 0.09pc, while the AA Cash Isa (Easy Access Issue 1) and the Halifax Variable Isa Saver return 0.1pc.
"Even if you open a fixed-rate Isa rather than a variable one, you need to make sure you know what happens at maturity, or once again you could find that your cash is moved into a maturity account paying a paltry rate," Ms Bowes warned.
"Worse still, you could simply find that the funds are rolled over for another term, but not necessarily at a competitive rate. Check what your provider is offering at maturity and if it’s not competitive, switch."
Ms Bowes said it was crucial to keep cash in easy-access cash Isas with high rates.
"Switching if your rate is not competitive is particularly important for cash Isas, as they should be the last easy access accounts to be drawn from if you ever need it," she said. "Once the money has been withdrawn, it needs to be replaced within the same tax year or the tax-free allowance will be lost forever."
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