They thought they were gold digging, but savers are stranded with dirt-cheap rates

If you want a good return, avoid accounts with the metal in their name. Melanie Bien reports

All that's gold doesn't glister - particularly with savings accounts. While "gold" implies wealth and value, accounts with this word in the name should be avoided if you are hoping to generate decent returns on your cash.

New research from the internet bank Egg says "gold" accounts don't pay a superior rate of interest - even though customers may be justified in thinking they do because of the reference to the precious metal.

There are eight "gold" instant access savings accounts, paying an average of just 0.4 per cent gross annual equivalent rate (AER) on balances of £2,500. If this remained unchanged over 10 years, a higher-rate taxpayer would get a return of £61 after tax on a £2,500 investment. When you compare this to the highest-paying savings account available - 4.02 per cent from ING Direct - it becomes clear that gold accounts are bad value.

Yet many don't realise this. As part of the Egg research, pollster Mori asked 1,000 people if they thought gold accounts offered the best rate of interest: two-thirds thought they did.

One of the worst offenders is the Halifax's instant access Liquid Gold, which pays 0.1 per cent on balances up to £100,000. The account, known as Leeds Liquid Gold until the Halifax bought the Leeds Permanent building society in 1995, used to pay much better rates of interest. This justified the claim - that customers would be "laughing all the way to the Leeds" - used by George Cole in the guise of second-hand car dealer Arthur Daley in the huge TV ad campaign.

But the rate has since fallen, so it is just as well the account is no longer available to new customers. Bonus Gold is slightly more attractive, offering 1.5 per cent on balances of £10,000 and upwards, but you must give 30 days' notice to get hold of your money. If you don't make more than one withdrawal a month, you get a 0.5 per cent bonus. Liquid Gold customers would be better off opting for the Halifax's current account, which pays 2.5 per cent interest and offers easy access to your money via an ATM.

Mark Hemingway, spokesman for the Halifax, argues that Liquid Gold has a low rate of interest because of the running expenses. "Liquid Gold is a passbook instant access account for people who don't want any restrictions, and the rate reflects the cost to the organisation of providing this," he says. "Some people prefer face-to-face contact in the branch and don't want to use the telephone, post or internet to do their banking."

He adds that the account is not ideal for customers with a lot of savings: "People with balances over £500 shouldn't be in Liquid Gold. Once their balance reaches this amount, we encourage customers to switch to another account."

Halifax writes to customers fairly regularly to suggest they visit their local branch to discuss transferring their money to an account paying a higher rate. Some £20bn of customer money has been switched in the past few years. "Savers should review the rate paid on their savings to ensure they remain competitive, particularly as the base rate is so low," adds Mr Hemingway.

The gold accounts were all introduced between 20 and 30 years ago and paid much better rates of interest at the time. They have since become unloved by their providers, which all offer alternative, and much more competitive, accounts. Stroud & Swindon pays 2.35 per cent interest on its Branch Instant account, for example - far better than the 0.35 per cent generated by its Classic Gold.

But David Greenleaf, spokesman for the building society, says there are good reasons for this: "Classic Gold has been our basic account for many years; I suspect we called it that because it was a topical name and the rate was higher then.

"It has always been our straightforward account where people can come into a branch, put a pound in and take a pound out, if that's what they want to do. Why would we want to change the name so we don't refer to gold? That would only confuse everybody, especially as we wouldn't be changing the terms."

He says customers at some branches tend to use Classic Gold as a pseudo bank account. "There are no penalties for withdrawals; people typically pay their wages in on a Friday and will have made several withdrawals before their next payday the following week. With Branch Instant, a minimum investment of £500 is required and we would frown upon a customer making regular withdrawals."

With the Bank of England base rate so low, finding an attractive savings account is becoming a struggle. But good products are out there (see the table alongside). Steer clear of the "big four" - Barclays, NatWest, HSBC and Lloyds TSB - and go online to do your research. www.moneysupermarket.com and www.moneyfacts.co.uk offer comparative tables helping you find the best deal.