Savers are being warned that bonus interest rates on accounts may not prove as secure as assumed.
West Bromwich Building Society has just written to tens of thousands of “regular saver” customers telling them their 2 per cent annual bonus will be cut to 0.75 per cent from April.
The society said the fall in the base rate - now at a record low of 0.5 per cent - forced it to review its bonus accounts and that the new interest rate of 1.5 per cent, including bonus, was “fair in terms of what the market pays”.
But the reduction is unusual because it applies to existing customers who have been meeting the conditions for the yearly payment - funding their accounts monthly and limiting withdrawals - rather than just new savers. Such bonuses have been seen as insulating accountholders from falling cash returns.
Kevin Mountford, head of savings at Moneysupermarket.com, the comparison service, described the cut as “another example of existing customers being disadvantaged”.
“What’s the point of a bonus, if providers have the ability to ‘slice and dice’ it?” he asked.
David Black, banking consultant at Defaqto, the research firm, said: “Because of where base rates are, I wouldn’t be surprised if more banks and societies did this to their customers.”
Under industry rules, as long as a bonus is not specifically described as “fixed”, banks and societies can reduce the payment by giving accountholders as little as 30 days’ notice, said Adrian Lloyd, enforcement director at the Banking Code Standards Board. “It’s tough times – customers who want security need a fixed-rate, fixed-term account,” he said.
However, a spokeswoman for the Financial Ombudsman Service, which arbitrates on complaints, said: “If a banking contract clearly states that a bonus will be paid if a consumer meets certain requirements, we would not generally expect a unilateral change in the contract part-way through the bonus cycle.”
David Johnson, retail divisional director of the West Bromwich, said his society had complied fully with the Banking Code and “Treating Customers Fairly (TCF)” guidelines, and only one saver had complained so far.
“We have followed rules on fairness… given 30 days’ notice of the change and are paying the [existing] bonus to the [account] year-end,” he said.
But Mountford claimed the reduction was “not in the spirit of fairness”.
Last month, Beverley Building Society backed down on a plan to halve the 3 per cent bonus on its Monthly Saver account, after conceding that existing customers might have assumed the payment would be maintained at the same level.
