Money Grouse: Switch offer would have reduced saver's returns

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The Independent Online
JOYCE LONG, a retired university researcher, was rather disappointed when she received a letter from the customer services department of National & Provincial building society, which holds pounds 920 of her savings.

The letter began: 'Dear Customer - At N&P we are committed to giving our customers the best advice on how to make the most of their money. That is why I felt it was important to write to you today. It has been quite some time now since you opened the above account, and in that time we have introduced several new financial options which may well be better suited to your current needs. I would strongly recommend that you consider transferring your savings into one of these newer accounts.'

But when she examined the product range that the letter outlined, Mrs Long, an economics graduate, concluded that this was in effect an inducement to cut her returns, not to improve them.

Her pounds 920 was already earning her a net interest rate of 8.02 per cent over seven years. This was a higher rate than was offered on all the other products outlined in the N&P letter, apart from the Tessa.

But even the Tessa had its disadvantages. Mrs Long knew that if she withdrew the money early from her existing Save As You Earn account her return would be cut retrospectively to 6 per cent. The current SAYE contract pays just under 7.5 per cent after five years. The new one being launched in April pays 5.53 per cent.

She rang her local N&P office, which in turn rang the head office. 'They then said that the letter was a mistake,' Mrs Long said. 'That struck me as a very feeble sort of excuse.'

A spokesman for N&P admitted that the letter to Mrs Long might not have suited her circumstances, but he stoutly defended the society's policy of communicating regularly with customers about its product range.

'We would be the first to admit that for Mrs Long switching may not be appropriate for her,' he said. 'We are not trying to twist her arm. But the alternative is that we don't tell people what is around. We would rather go to the other extreme and keep them informed.'

Last year, he said, pounds 15m extra interest was paid out as a result of 150,000 account switches - an average of pounds 100 for each person who switched accounts.

Mrs Long is fairly comfortable with comparing interest rate calculations. But she feels that other people might get similar letters and be tempted to switch accounts when it is not in their interest.

She says: 'Lots of people might not look into it or might be busy or might be old. It enforces the message: 'Investors beware'.'

Write to Money Grouse, The Independent, 40 City Road, London EC1Y 2DB. Please do not send SAEs or original documents as we cannot guarantee to deal with every letter personally.

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