Savers should switch if deals are second-rate

Their returns boosted by the rises in May and June, savers had begun to look forward to the Bank of England's monthly announcement on interest rates. So last week's decision to keep rates on hold at 4.5 per cent this month may have seemed an anticlimax. Yet with the excitement ebbing, this is a good time for savers to ensure they are getting the best deal.

There have been four base rate rises since November 2003, edging up from 3.5 per cent in notches of 0.25 points. But your bank may not have been so generous in passing all these on to you. For example, only if your no-notice savings account was at, or close to, the top of the "best buy" tables in June last year would you have benefited from the full 0.75 per cent rise between then and June 2004.

So while best buy tables come in for a lot of flak because critics argue that they give no indication of future returns, these findings show they are as good a place as any to start.

While banks and building societies are quick to pass on a rise in the base rate to mortgage borrowers, they react more slowly on savings accounts. And even when they do boost returns, they often do things by halves. For example, Nationwide and Abbey both failed to pass on the full 0.25 per cent increase in the base rate to all customers in June. Even ING Direct, once the darling of financial advisers recommending a home for instant access savings, has left customers short-changed. Its response to rate increases in February and May was to raise its own, but by less than the full amount - 0.19 per cent in both cases. Last month's rise elicited no response at all, with rates stuck at 4.6 per cent.

But after much criticism, the Dutch bank announced last Friday that from next month it will pay 4.75 per cent on every £1 saved in one of its accounts - still short of June's quarter-point rise. A bank spokesman says it simply tries to "remain competitive" and, according to Moneyfacts, this will be the standard highest rate of interest on £1 for no-notice accounts.

Other providers offering higher rates, such as Scarborough building society's 5.1 per cent, include bonuses that fall off after six months. In Scarborough's case, the bonus is 1 per cent and withdrawals are restricted to three a year.

Such strings show that failure to shop around could leave your money languishing at the bottom of the table. One way of avoiding this is to opt for a tracker savings account, which will at least ensure that you don't miss out on any future rate rises.