We've seen a number of the leading savings accounts withdrawn in recent days. This isn't unusual at this time of the year - many providers will have pulled in enough money to meet their annual target and can therefore afford to reduce the competitiveness of their offerings.
However, it's not good news for the millions of savers with money in fixed rate bonds that are about to mature. These people will be looking for new homes for their savings but they're finding themselves at the centre of a 'savings scrum' - having to grab for the best deals before providers whip them away again.
Complacency costs
Savers with money tied up in fixed rate bonds were protected from the interest rate cuts we saw between October last year and March. But many highly competitive deals have just ended or are about to end, and anyone with money in such a product needs to act now and reinvest their money otherwise it will probably be transferred into a default account paying a significantly lower rate.
Kevin Mountford, moneysupermarket.com's head of banking, said: "When a fixed rate bond matures, providers will either send a cheque for the capital and interest through the post, and close down the account, or transfer the money into a default account that usually pays poor variable rates of interest.
"In either instance, providers work on the fact there will be apathy in the market and, after the 'headline hook', they will start making profits on your money. In this case, be ready to beat them at their own game by transferring your cash to the next best deal."
Which deals are ending?
Fixed rate bonds which are ending include five-year accounts from Heritable Bank and Capital One that have been paying 5.50% and 5.40% respectively. Heritable also has some four and three-year bonds maturing - and remember it was owned by Icelandic bank Kaupthing Singer & Friedlander, so is no longer offering savings accounts.
Among shorter-term fixed rate accounts just ending are AKbank's one-year deposit account which paid 6.30% and Yorkshire Bank's one-year bond at 6.00%. And last December, ICICI Bank, Anglo Irish Bank and Birmingham Midshires were all offering one-year deals at 5.75% which will soon be coming to an end.
But with the Bank of England base rate having plummeted to just 0.5%, will these savers have to accept significantly lower returns?
What's available?
The good news is that, despite the historically low base rate, savers can still earn significantly more than that. And if you're prepared to lock your money away for three years or longer, it's still possible to earn a return of 5.00% or more.
Skipton Building Society is offering the leading deal that is fixed at
5.38% until 30 November 2014. Another option is The AA's five-year Fixed Rate Savings Account at
5.15%.
However, as with most fixed rate deals, neither of these products allow you to access your money during the fixed term so you should only consider them if you have savings you can afford to lock away for the next five years.
Savers preferring a shorter fixed term could consider Britannia Building Society's three-year Fixed Rate Bond (Issue 29) which is paying
5.00%.
So if your current fixed rate account is about to end you may not have to accept a significantly lower rate on a new account. However, that's assuming you can lock your money away for at least three years. If you can't, and are looking for a one or two-year product, the rates are lower albeit you can still earn a decent return relative to the base rate.
The AA's two-year Fixed Rate Savings account is paying
4.25%, and if you're looking for a one-year deal, the best you can get is from State Bank of India at
3.75%.
Of course, not everyone coming off a fixed rate deal will want to lock their money away again. If you'd prefer an account with greater flexibility, Bradford & Bingley's
Notice Saver Online is worth considering. You must give 60 days' notice if you want to make a withdrawal, but the rate is
3.30% - the highest among easy access accounts.
Also, it's worth noting that the rate includes a 12-month bonus of 2.80% so it will drop considerably after the first year and you should look to move your money again at that point.
Even 60 days' notice may be too much for some. If you want an account that allows immediate access, The AA's Inernet Extra (issue 1) and Birmingham Midshires Telephone Extra account are both paying
3.15%. Lloyds Banking Group provides both accounts so bear this in mind if you have a large amount in savings and are looking to spread your money around.
Remember under the terms of the Financial Services Compensation Scheme, only £50,000 is totally protected with a single institution (£100,000 if it's a joint account). And even though The AA and Birmingham Midshires are different brands, they share the same banking licence so you would only have £50,000 protection in total even if you had an account with each.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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