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The last giant to fall - Barclays cuts savings rate to 0.01% AER

We explore what’s behind rate cuts in the savings market as Barclays becomes the latest to cut to 0.01% AER. And we look at an easy way to get a better return on your cash.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Barclays has now joined other big high street banks in cutting their instant access savings rate to just 0.01% AER/Gross. That means if you have £10,000 saved in one of these accounts, you’ll earn a paltry £1 interest after a year.

High street banks now paying just 0.01% AER/Gross on instant access accounts

Barclays Santander* HSBC*
Lloyds NatWest Halifax
Bank of Scotland RBS TSB*

*Santander and HSBC also offer other instant access accounts at 0.05% AER if managed online and by mobile only. TSB offer a rate of 0.01% AER/Gross but with an additional bonus of 0.01% AER/Gross for the first 12 months.

In a domino of drops, rates have fallen since the Bank of England (BoE) cut the base interest rate in March. The base rate is normally used as a reference for banks when setting their savings rates and in March it was cut from 0.75% to 0.1% – a record low.

But there was another important measure introduced by the BoE – the Term Funding scheme. This helps banks borrow money to fund more lending at the base rate. It means they can get money from the BoE at 0.1%, so don’t need to offer high rates to savers to bring money in.

The downward spiral of average market rates

Scroll across to see the full chart.

Source: Bank of England 30 June 2020.

Waiting for a competitive rate? Sign up to our alerts and we’ll email you when competitive rates are added to Active Savings.

Get savvier to boost your returns

If you’ve got money in a savings account with one of the big banks, the chances are your money could be working harder. Acting now could mean you get better returns on your cash.

For money you don’t need access to straight away you could consider fixed term savings as a way to boost your cash. Fixed term products normally pay a higher rate than instant access, but you won’t usually be able to access the money until the product matures.

This doesn’t mean you need to lock your money away for a long time. You can usually fix for as little as three months, or up to seven years if you’d prefer.

As the rate is fixed for the length of the product you’ll benefit if rates then drop. But on the other hand you won’t benefit if they rise. Remember too inflation can reduce the spending power of money.

Blending fixed terms of multiple lengths could give you the best of both worlds – a better overall rate while still keeping some flexibility.

To do this you might need to look past your high street bank as they typically offer a limited range of fixed term savings products. This usually means scouring the market to find the best deals, applying to different providers and setting up new security information. Sounds a pain, doesn’t it? There’s an easier way.

An easier way to mix and match savings products

Active Savings can help. It cuts out the hassle of applying to multiple providers and managing your savings across them. Through one online account you can choose easy access and fixed term savings products from a range of banks and building societies.

Because it’s all through one account, you’ll only have to remember one set of security information. You’ll see all your savings together in one place, making it easy to manage. And you won’t have to prove who you are time and time again when selecting products with new providers.

There are competitive rates on offer, often above those offered by the big banks. All our partner banks are authorised by the Prudential Regulation Authority (PRA), regulated by the Financial Conduct Authority and PRA, and are covered by the Financial Services Compensation Scheme (FSCS).

Discover Active Savings

Products available through Active Savings can be added or withdrawn at any time. Minimum deposit requirements apply to individual products. Instant access products allow immediate cash withdrawals, Active Savings offers easy access products where withdrawals usually take one working day.

AER stands for Annual Equivalent Rate and shows what the interest rate would be if interest was paid and compounded once each year. It helps you compare the interest rate on different savings products.

Gross means the interest rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change. Rates may be subject to change and depend on individual circumstances.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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