JEFF PRESTRIDGE: The Isa market is broken despite a strong financial picture… and that’s shameful


Although the country may be in a better place than many imagined it would be ten years ago when a wicked financial crisis threatened to bring down the banking system, there have been plenty of losers.

Step forward the country’s savers who depend upon the interest from their various deposit accounts and Cash Isas to make ends meet. 

They have seen their savings income slashed and smashed. Not just because of a crashing base rate that was 5 per cent and higher pre-2008 financial crisis, and down to 0.25 per cent until just less than a year ago. 

Jeff Prestridge says the UK now has 'a dysfunctional savings market which for the most part does not work in the best interests of consumers'

Jeff Prestridge says the UK now has 'a dysfunctional savings market which for the most part does not work in the best interests of consumers'

Jeff Prestridge says the UK now has ‘a dysfunctional savings market which for the most part does not work in the best interests of consumers’

But as a result of banks – and many building societies – having to focus all their energy on restoring balance sheets to something resembling good health, cutting costs and ruthlessly axing branches with impunity.

A restorative process aided by governments prepared to lend them buckets of cheap money. Indeed such bargain basement finance that it quelled their need to go out and attract savers with eye- catching deals.

The result? We now have a dysfunctional savings market which for the most part does not work in the best interests of consumers – a message you, as readers, regularly remind me about in emails (keep sending them in).

Overwhelming evidence of how broken the market has become is presented opposite in our special investigation into Cash Isas, the mainstay of most savers’ portfolios. Tax-free and in the case of the accounts we have focused on – variable rate, easy access Cash Isas.

As our exclusive report reveals, only a handful of savings organisations have passed on the full benefit of the two increases in base rate since November last year to savers in these Isas. 

Most institutions have only tickled up rates while a handful have stubbornly sat on their hands and refused to do anything – other than assess the boost their parsimony brings to their bottom line (profits). 

As our exclusive report reveals, only a handful of savings organisations have passed on the full benefit of the two increases in base rate since November last year to savers in these Isas

As our exclusive report reveals, only a handful of savings organisations have passed on the full benefit of the two increases in base rate since November last year to savers in these Isas

As our exclusive report reveals, only a handful of savings organisations have passed on the full benefit of the two increases in base rate since November last year to savers in these Isas

Outrageous? Yes. Indefensible? Yes, although some such as those who sit at the high table of the Building Societies Association beg to differ. In terms of solutions, I urge all Cash Isa savers this weekend to review the interest they are getting on their money – and transfer it if they can get a better deal elsewhere. 

You may be uncomfortable about shifting provider because of a long- standing relationship with a specific bank or building society – maybe one that has a branch in your town which you like to use to do all your transactions.

Fine, but you could be surprised to discover that the Isa you have money in is paying an inferior interest rate to an alternative offered by the same provider. Ask the question next time you visit. Provided, of course, that the branch has not just been shut – Royal Bank of Scotland announced another 54 closures a few days ago.

Other Cash Isa savers who have no loyalty to a particular provider – and are happy to transact online – should shop around in search of best or better rates.

Our investigation also proves beyond doubt that it is now time for regulatory intervention. The Financial Conduct Authority – the regulatory overlord of the savings market – has already bandied about the idea of a ‘basic’ savings rate that savings organisations would apply to all easy access Cash Isas. A kind of permitted minimum rate. The sooner it acts on this idea, the better because as the evidence we have presented today proves, the Cash Isa is broken and in urgent need of a reboot.

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Remaining on issues of fairness and regulatory intervention, Ofgem should be patted on the back for detailing how it will help give 11 million energy users a better deal with the introduction of a price cap. The exact level of the cap, which will apply to households on poor value ‘default’ tariffs, has yet to be determined. But regulator Ofgem suggests that its introduction (by the end of the year) could reduce annual energy bills by about an average £75.

Although the savings may not be as large as Prime Minister Theresa May promised they would be before getting Ofgem to set the cap – she wanted £100 – it is a step in the right direction. As welcome a move as a ‘basic’ savings account rate would be for Cash Isas. But the 11 million households sitting on expensive tariffs should not wait for the cap to weave its magic. Like many downtrodden Cash Isa savers, they should be shopping around now. Better deals can be found in abundance. 



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