'Teaser interest rate' warning for Isa savers
Many savers fail to switch their Individual Savings Account (Isa) to gain a better interest rate, a consumer watchdog has said.
A Consumer Focus poll suggested that two-thirds of people who opened a cash Isa with an introductory bonus failed to switch when the teaser rate expired.
A third of those asked were not sure when or if their bonus rate had run out, the survey of 2,012 people found.
Banks say they notify customers if the interest rate changes.
An Office of Fair Trading report found that about 11% of Isa holders switch to a new provider in a typical year.
Tax-free Isas were introduced in the UK 12 years ago to encourage people to save. An estimated 15 million people in the UK have £172bn held in cash Isas.
Activity among Isa providers tends to pick up at this time of year, as the tax year ends and a new one starts.
Savers who already hold an Isa, or who are opening a new one, are being urged to check the long-term interest rate being offered.
"Sadly Isa customers have to watch banks like a hawk if they are to get the best deals," said Oliver Morgans, financial services expert at Consumer Focus.
"With consumers getting a paltry return as low as 0.1% on some accounts, our advice to savers is to check your rate and if you are not happy, vote with your feet and switch to an Isa that pays more."
Andrew Hagger, of financial website Moneynet, said: "The situation is that best-buy rates of 3% plus are only being taken by a certain number of people. The other people who are not checking their rates are getting a really poor deal and are subsidising the people who are getting the top rates.
"It can be a huge amount of money. If you have got a £5,100 sum and your rate drops from 3.25% to 0.5%, your annual interest drops from £175 a year to £25, so it is a huge amount."
In its report into the Isa market, published in June last year, the Office of Fair Trading gave a clean bill of health to Isa providers for introductory bonus offers.
The British Bankers' Association, which represents the main High Street banks, said: "Banks automatically notify customers if there are changes resulting in materially lower rates specifically so they can switch their funds.
"Banks provide a variety of savings products to suit people's needs and have no interest in keeping customers anything less than fully informed about the products they use.
"Information about alternative products is readily available in branches, online and from a variety of other sources, including newspaper best-buy tables and comparison websites. Interest rates vary depending on the amount customers have to save and the time they can afford to leave the cash untouched.
"As with any product or service, it always pays to shop around for the deal which is best for you."