Retirees miss out on their share of billions due to savings rates cuts

Font Size:

Australians old and young have missed out on about $1.6 billion in just the past six months, due to bank cuts to interest rates on savings products.

As of August 2020, the average savings rate was cut from 1.15 per cent at the same time last year to 0.65 per cent. Aussie banks and financial institutions have made 1736 cuts across all savings products since 1 March 2020.

Term deposit holders were the biggest losers, with term deposit products copping a total of 844 cuts. Savings account rates were cut 635 times in the same time, and the remaining 257 cuts applied to bank accounts.

The average savings rate across the Big Four banks fell from 0.57 per cent to 0.32 per cent in the past six months.

The cuts, mostly made to cover the costs of a home loan price war, meant that savers have missed out on $1.6 billion in interest payments.

“As mortgage holders enjoy record low interest rates, it’s no secret that the banks need to find other ways to remain profitable,” said money expert Kirsty Lamont.

“Taking from Australian savings accounts is an easy way to ensure the books stay nice and plump.”

Despite big bank rates being less competitive than those of smaller rivals, they are still the favoured financial institutions for around 80 per cent of Australians.

With the exception of Westpac, the ongoing savings rate offered by the Big Four is between 0.4 per cent and 1 per cent

Westpac offers a three per cent rate on its Life accounts, but only to customers aged 18 to 29.

Ms Lamont says savers should look to smaller banks, such as community banks and neo-banks, for more competitive rates.

“The best ongoing rates are currently 1.75 per cent with Australian Unity,” she said.

“You could also nab a competitive intro rate of 2.20 per cent with Heritage Bank.

“As far as term deposits, Judo Bank is offering a 1.30 per cent rate, which is the best 12-month term on the market.”

Have you considered switching banks? Have you investigated neo-banks for better returns?

If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

RELATED LINKS

The inside story on how to choose the best term deposit

Choosing a term deposit might sound simple, but you should consider these tips.

April superannuation results defy virus gloom

Returns escape plunge experienced during the Global Financial Crisis.

Neobanks challenge Big Four’s ‘sneaky sh*t’

Australia's digital banks are shouting from the rooftops about their interest rates and taking

Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

Contact:
LinkedIn
Email

20 Comments

Total Comments: 20
  1. 0
    0

    “Have you considered switching banks? Have you investigated neo-banks for better returns?”

    No, we haven’t thought about changing banks. I find it curious that this article is trying to suggest that, somehow, a business trying to make a profit for shareholders is doing the wrong thing. Instead of trying to blame banks for low returns on investments, why not go back to why this has been allowed to happen. In 1983 the government passed a bill deregulating Australian banks and allowing foreign banks to set up business in Australia. This deregulation meant, along with more competition, that the Reserve Bank’s decisions to increase or lower interest rates were no longer to be followed by banks. There was a fail safe built in in that the Commonwealth Bank and various state banks were controlled by governments which made private banks follow their lead on interest rates. Subsequent governments either sold off state banks or allowed them to close down, the Commonwealth was sold to the public and there was no longer any impediment to stop private banks doing as they wish.

    • 0
      0

      Your idea that international banks are not controlled by the RBA is incorrect. To operate in Australia ALL banks have reserve requirements imposed by the RBA and through their market operations control the headline interest rate. What the article is saying is that the MIX of products of the banks where they competitively pursue business in property financing is at the expense of other products, the main one being interest on savings of which retirees are holding a great deal of wealth. The other confusion you have is that banks pay shareholders dividends on their real profits – they don’t. They pay dividends based on theoretical expectations of profits, which are paid from largely low interest borrowings from savers. So the premise of the report is entirely sound, where retirees are funding the growth of bank profits while being screwed in the process with low returns.

    • 0
      0

      The privatisation of thew Commonwealth Bank has been a disaster as it removed the control they had on the rapaciousness we have seen in recent years. The CBA uswed to do that while still being in open competition with the other banks.

  2. 0
    0

    Have you considered switching banks

    LOL thats the best laugh I have had this week..

    They are all tarred with the same brush….

    Like asking have you changed electricty providers what to save 10 dollars a year.

    There is no competition when shareholders and profit is the main ingredient

    • 0
      0

      Totally agree on both counts. Banks are good at luring you in – but then change the ground rules.

      My neighbours switched to a new electricity provider 12 months ago – and their bills have gone UP because the discount is not on fees and charges. They get around it by saying ‘we said we could save you money on your electricity, not your electricity bill’.

    • 0
      0

      So when are the banks going to reduce credit card interest rates ? Seems the rate reductions are all loaded towards the same banking interests.

  3. 0
    0

    being a neo bank sounds like being half pregnant…. Ms Lamont suggesting savers venture away from mainstream banks to chase extra interest reminds me of those heady days of high interest when savers did just that and we ended up with the Pyramid fiasco. Higher interest and higher risk are bedfellows. In my case, on a part pension, any increase in assets or earnings results in a reduced pension payment so whats the point of chasing an illusory gain.

  4. 0
    0

    Have you tried Peer to Peer Lending. I put a small amount of my savings into one of the lenders about 2 yrs ago. I have been getting a good but declining return. Started out at 10% but has slowly declined to 6% as bank rate has come down. I also think there is an excess of money to lend which is forcing the rate down. Still 6% is better than 0.5 % with the bank.

  5. 0
    0

    Will the Government reconsider deeming rates or abolish it once and for all.

  6. 0
    0

    It’s about time the government forced banks to reduce the interest rate on credit cards in line with the reduction in interest rates generally. The banks are quick to reduce savings interest rates. Will feel the wrath of the government if they don’t reduce mortgage by some but credit cards go untouched.
    The government should set a ceiling on credit cards rate & other loans like payday loans etc.
    Some will say governments shouldn’t interfere with private enterprise but when it’s interest rates are ridiculously high against the main interest rates like mortgages they should step in.

    • 0
      0

      Credit cards are for short term credit only (4 to 8 weeks max depending on the card).
      To leave a credit card in debt for long enough to be charged interest is foolish and is not the correct way to use one.

      Remember that the original credit cards (Amex, Diner’s, etc) HAD to be paid off completely at the end of each month.

      Interest on unsecured credit has to be much much higher than other credit because the risk of default is very high.
      Karl, do you really think that other borrowers with secured credit should be required to subsidise your credit card debt? That sounds more like the action of your namesake.

    • 0
      0

      Here I agree with you Karl. My credit card rate is 20.25% and I make damn sure I never have to pay it. Try to keep in positive balance as much as possible. Problem is we have to have one of those cards, not having one you become a non person somehow. Try to book into a hotel without one, debit card won’t do in a lot of cases. Staying in a hotel at the moment and we pay weekly. Credit card used and put the funds on it next day – no problem.

    • 0
      0

      I don’t have credit card debt or any other debt.
      Interest rates on credit cards, payday loans etc are way to high & excessive.
      Not everyone is in position to clear debt each month but unlike you Hawkeye I don’t bury my head in the sand because it doesn’t affect me.

    • 0
      0

      Karl Marx – As Hawkeye says credit cards are short term debt, or should be, they are unsecured lending and as such you pay a high rate. fraud on credit cards is massive, the high rates go someway to cover that as well as all the bad debts the banks get with defaulting credit card customers.

      I use my credit card constantly, all purchases are with my card as it’s very convenient and you can even throw it into credit if you like and use “your” money. I have never paid interest, no fees, it’s great.

  7. 0
    0

    I lost faith in the banks when Bendigo refused to honour the promise to pensioner savers that they would match the deeming rates on deposits.

    • 0
      0

      That must have been a while ago. The last deeming account was offered by the Military Bank and not everyone could be a member. If you live in Canberra it might still exist.

  8. 0
    0

    Do you remember when for decades savings passbook accounts paid 3.75% (on minimum monthly balance), club cheque accounts received 3.5% (on the same basis) unless they were rifle clubs which were paid the higher rate because they were helping protect the nation? And we complained it wasn’t high enough! Ah, those were the days….

    • 0
      0

      Remember it well, Bill. But I also recall the 16.4% interest on my mortgage payment. Got another notice of a rise to 17.2% in 2 weeks’ time when I handed the keys to the estate agent and “please sell”. Later I got 18% on a term deposit for 12 months. Was a roller coaster ride I would not wish on our younger people who are blissfully ignorant what financial turmoil could await us again. I think that makes me feel old.

  9. 0
    0

    Honeymoon rates / intro rates annoy me as it is quite a business to open an account with a new bank and transfer money in, only to be dropped to a really low rate when the “honeymoon is over”. People can’t easily change banks every 4 to 6 months, but it’s the only way to get the best interest rates and this must be at the expenses of other savers. It should be illegal.


FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

Australia

What happens to regional travellers when borders snap shut?

Beryl lives in a regional area and is planning a trip to another regional area and wants to know if...

Uncategorized

Surprising Aussie town of the year revealed

If you were asked to name Australia's best town, what would you say? If your mind wandered to the sweeping...

COVID-19

Avalon airport first to introduce COVID testing kiosks

Avalon Airport is the first in Australia to use COVID-testing kiosks after the HealthGate machine was approved by the Therapeutic...

Destinations

Some of the world's most verdant city escapes

In an increasingly eco-conscious world, smoky, fume-filled cities often get a bad name. The car exhaust, the noise pollution, the...

Cruising

Simon and Carla Fowler are sailing through retirement

As soon as the pandemic is over and life returns to some semblance of order, would you consider buying a...

Uncategorized

Can you guess the city from a virtual walk around the streets?

As we rapidly approach the one-year anniversary of Australia's international borders being closed, you will not be alone in missing...

Accommodation

New South Wales' top five stays

Airbnb in New South Wales is booming. The variety and quality of stays is staggering. However, many of the most...

Destinations

Jordan is a Middle Eastern delight

"Jordan is one of the driest places on earth. About 75 per cent of our land is desert," notes our...

LOADING MORE ARTICLE...