3 September 2014

Barclays move ISA savers to lower interest rates


The following article was recently run in the Guardian (http://www.theguardian.com/money/2014/aug/06/barclays-isa-savers-interest-rates):

More than a million savers who hold Isas with Barclays are set to see their returns drop as the bank announced it is moving them all on to a product with a lower interest rate.

From 5 November, Barclays will move customers who hold any one of 11 Isa products that are no longer open to business on to its newer Instant Cash Isa, which pays between 1.29% and 1.49% annual interest depending on the balance. The move will see some 1.6 million people moved on to a worse rate. A further 740,000 customers will receive the same or more interest than they currently get.

The worst affected will be those who hold the bank’s Freestyle Cash Isa, which pays 2.76%, as those with a balance of less than £15,000 will see their interest more than halve to 1.29%. Other savers that will be worse off include those with the bank’s Loyalty Reward Isa, which pays 2.03%.

The bank, which is writing to all affected customers, said it wants to simplify its range.

“We want to simplify the way we do business with our savings customers,” said Lee Chiswell, head of savings at Barclays. “These changes will make it easier for our customers to understand their products, and easier for our staff to serve them.”

Some customers will be better off, such as those with the now closed for business Barclays Cash Isa, which pays a paltry 0.10%.

“Over the years, with numerous issues and bonus accounts, many providers have built up quite a back book of products which could lead to confusion for customers when trying to locate their account,” said Susan Hannums at independent savings advice site Savingschampion.co.uk. “Although Barclays have to be commended for simplifying their Isa range, many customers will see a reduction in their rate and in some cases a quiet substantial drop in rate. Certainly those currently holding the Barclays Loyalty Reward and Freestyle Isas which are currently paying over 2%, will be sorely disappointed with the lower rates now available to them.”

Barclays is not the first bank to cut rates as part of a move to simplify their savings product ranges. Earlier this year, NatWest and sister bank, Royal Bank of Scotland (RBS), moved 3 million Isa savers off older deals and on to newer ones in order to “simplify” their deals. Around 1 million people saw their interest rate cut as a result while around double this number saw it go up.

In February, HSBC announced it had scrapped introductory “teaser” rates on savings products, saying this would give customers “peace of mind” about the returns they would be getting.

According to figures from financial information website Moneyfacts, the average easy-access Isa rate on the market has fallen over the last year, from 1.28% in August 2013 to 1.18%.