Banks take advantage of pensioners' savings

Thursday, 29 January 2009

It has come to light that pensioners are not getting thousands of pounds of interest each year because banks are putting savings from high interest accounts into others with poor returns.

Many elderly savers are receiving just 0.08% interest after tax. That would get them £80 on £10,000 saved, but if they were into a better interest account they could earn more than £2,000.

Northern Rock and Halifax – both propped up by the taxpayer – and Nationwide are culprits of this practice.

Mervyn Kohler, special adviser for Help the Aged, said: “There are going to be people who don't respond to letters from their banks and they shouldn't just end up in the worst-paying account. It seems incidents like this happen with banks all too frequently.”

Pensioners often choose fixed-rate bonds as they provide a regular income by giving a specific interest rate over a one or two-year period. However, at bond maturity, some banks and building societies let the money fall over into 'matured bond accounts' – with poor interest rates.

Although the banks may not technically be breaking any rules as they write to customers one month before the bond matures, the practice is criticised because many savers do not understand the complicated jargon used by banks in their correspondence.

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