Packaged accounts increase by 94% in four years but experts warn there is no let up for savers

News - Savings

Written by Ray Clancy

Tuesday, 08 June 2010 10:00

The number of packaged current accounts available has increased by 94% in the last four years with their average monthly fee also rising, by 42%, research shows.

Also the number of packaged current accounts available now exceeds the number of standard current accounts for the first time. There are now 64 packaged current accounts available compared to 61 standard current accounts, according to research from independent financial research company Defaqto.

‘Consumers now have the widest choice of current accounts to select from. We’ve seen a big increase in the number of packaged current accounts available with many banks now offering a range of different account options with the monthly fee charged being based upon the level of benefits and incentives offered,’ said David Black, banking specialist at Defaqto.

Currently, the five most frequently offered benefits on packaged accounts are commission free foreign currency and travellers’ cheques, 91%, travel insurance, 81%, preferential rates or deals for savings accounts, 80%, mobile phone insurance, 72%, motor breakdown assistance, 59%.

But overall there is more gloom for savers, according to Moneynet.co.uk. It says a dozen best buys have disappeared in just one week. ‘The bad news for UK savers just seems to go on and on, with record low rates, the axing of Child Trust Funds and changes to Capital Gains Tax potentially threatening those taking advantage of company save as you earn schemes,’ said Andrew Hagger of Moneynet.co.uk.

‘This artificially low rate environment has been causing misery for those who rely on an income for their savings for at least 18 months now, and they’ll be dismayed to learn that at least a dozen best buy savings deals have been pulled or had rates slashed during the last week. There have been some cuts in the ISA market however the bulk of the bad news seems to be with fixed rate bonds, particularly the longer term products,’ he explained.

‘The chase for best buy rates continues to be fuelled by people still coming off existing fixed rates of up to 7% and desperate to reinvest at the highest rate possible. This has meant savers increasingly having to opt for longer term deals than they would have wished,’ he added.

While there are many people locked into good deals these are coming to an end and they will soon be joining the hoards of other customers chasing a handful of half decent accounts, he has found.

‘Until we see an upward movement from the 0.50% base rate there’s little chance that savers will have anything to smile about, in fact with VAT set to rise and inflation taking chunks out of any return they manage to make, it’s just more doom and gloom. With rates at rock bottom there’s little incentive to save, and many people are starting to wake up to the fact that the financial rewards are greater if they make overpayments on their mortgage or credit card borrowing,’ said Hagger.