As Santander slashes rates on its market-leading 123 account, will this be a lost decade for Britain’s savers?

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Once wildly popular, the 123 account now looks much less appealing (Source: Getty)

Danny Cox, a chartered financial planner who works at Hargreaves Lansdown, says Yes.

The nightmare for savers continues with little sign of respite. The few bright spots, such as the Santander 123 account, are following an inevitable path of rate decline. Savers now face a lost decade of returns on their cash. Inflation rises on the horizon are set to erode the spending power of cash in the bank further. Shopping around for better deals remains key to improving the saver’s lot and is vital with so many accounts paying absolutely nothing. Central bank policy presents a choice for savers of taking more risk, or simply accepting lower returns and having to stash away more money to meet financial goals. There is little prospect of relief for the next few years, and even then a recovery in savers’ rates is likely to be slow. Those who have been waiting for higher rates for so long must now consider whether it’s still worth chasing the pot of gold at the end of the rainbow.

Kevin Mountford, head of banking at MoneySuperMarket, says No.

While competitors have continued to slash their savings account rates, the industry incentives on your current account are worlds apart from those offered five years ago. The introduction of the seven day switch has helped drive competition in the current account market, and we have seen an influx of incentives being offered by providers in a bid to entice customers with attractive deals. One such lure is the in credit interest rates offered, and those available on current accounts are still some of the best on the market, beating many savings account rates. For example, Nationwide and TSB offer 5 per cent on in credit balances up to £2,500 and £2,000 respectively, beating the current leading online easy access savings account, RCI, at 1.20 per cent. With the recent cut to the base rate, we have seen many providers reduce rates, but while saving might not seem worthwhile to many in the current environment, putting away a small amount of money is far better than saving none at all.

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