Loyal customers are suffering at the hands of “woeful” interest rates as some “scissor-happy” banks cut the return offered to existing Isa holders, according to research by consumer group Which?.
After analysing 212 Isas from 21 providers, the group found a “staggering” number of rate cuts over the past six years, with banks generally making more cuts than building societies.
Focusing on existing customers who were not aware of the rate cuts when they opened the account, the research found M&S Bank’s Flexi Cash Isa was the worst culprit with a rate as low as 0.05 per cent after the 30-month bonus had expired.
NatWest has been the worst offender for cuts-per-account, with eight rate cuts across two accounts between April 2010 and April this year.
The bank’s e-Isa earned savers 2 per cent in 2010, but customers who haven’t moved their money will now be earning just 0.25 per cent.
“Too many banks are paying truly woeful rates of interest or are scissor-happy when it comes to cutting rates.” Harry Rose, WhichHarry Rose, money editor at Which?, said the “stingy” rates offered by some providers mean they are often penalising their most loyal customers.
“Too many banks are paying truly woeful rates of interest or are scissor-happy when it comes to cutting rates,” he said, adding savers don’t always have time to constantly hunt around for the strongest returns.
The research also revealed Halifax, Lloyds and Santander are all offering introductory accounts with rates as low as 0.25 per cent.
However, building societies were found to be most dependable after making fewer cuts over the past six years.
Principality Building Society came out top having made just one cut across five Isas and West Bromwich continued to pay existing customers the 1.25 to 1.55 per cent rate they signed up to, despite the accounts closing to new business.
Coventry Building Society offers existing customers at least 1.5 per cent on closed accounts.
Mr Rose added: “Savers who do not want to keep moving their savings about should consider parking their cash with one of the more reliable building societies who have been better at not cutting their rates for existing savers.”
katherine.denham@ft.com
