Watch Those Interest Rates!

A salutory tale for anyone, particularly in the UK with an ISA, but good advice generally – watch those interest rates.

In the UK, there’s a tax-free saving scheme promoted by the UK government called the “Individual Savings Account” or ISA.  It’s there to try and get people to save money and because it’s tax-free, there are limits on what you can save.

As it’s intended to be long-term savings plan, you only get bank statements once a year and in my case, my ISA earned over £200 in interest in 2007, just under £200 in 2008 and….about £4 in 2009.  Yup, four pounds.

The sneaky bank had changed the interest rate on the account from a couple of %  to about 0.1%.

Naturally, during the year they told me that “interest rates were changing” and included a sheet of all their accounts with interest rates, fulfilling their legal requirement.  At the time I assumed that the interest rates were changing because the Bank of England interest rate had changed and didn’t bother looking at the exact rate.

What I should have done is found the particular ISA I had, and then looked it up on the sheet, in among the 50-odd products listed.  Like many others, I didn’t, so the bank saved lots of lovely money for itself instead of having to pay out interest.

To say that I’m annoyed is an understatement.  I’ve lost nearly £200 in interest but Santander, you’ve lost a customer for life.