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Tuesday, July 26

Pay to Save: After Cyprus they were called alarmist for warning that goverments were at war on savers

The good news, at least for England: "[If] rates go negative there would be "at least 20 banks waiting in the wings" to obtain licences and begin offering savers higher rates, increasing competition.

But what about the United States, where the Fed doesn't want the rabble to use saving accounts?

Savers fear negative interest rates as Natwest warns businesses might have to pay to hold cash
By Tim Wallace, Katie Morley 
25 JULY 2016 • 9:48PM
The Telegraph

[See also video clip in Telegraph report that quotes Mark Carney, Governor of The Bank of England: "We may need to cut interest rates in a few months."]

Natwest has become the first bank to warn business customers it may charge them negative interest rates on money held in current accounts.

In what is believed to be a UK first, the bank has signalled its intention to force account holders to either pay to hold money or move funds elsewhere.

Although current plans for negative rates are restricted to business customers, fears are mounting that "pay to save" rates could soon become a reality for millions of consumers, if other banks follow suit.

The outgoing pensions minister, Ros Altmann, warned negative interest rates on current and savings accounts pose a threat to the financial security of older savers, who often rely on their savings to provide a retirement income.

A number of high street banks including HSBC, The Post Office and First Direct are already offering savings accounts with rates as low as zero, as this newspaper reported last week.

A move to negative interest rates would turn a key part of banking on its head, with banks effectively paid to store people's money, while savers are penalised for keeping money in their accounts.

However this could become a reality if Mark Carney, the Governor of the Bank of England, cuts Bank rate to 0.25pc in August after seven years of it being held at 0.5pc.

Bank rate strongly influences the level of interest banks and building societies choose to pass on to their customers, although some banks offer significantly more or less.

Natwest blamed the potential decision on ultra-low interest rates imposed by the Bank of England, which it said were putting huge pressures on its finances.

Baroness Altmann said: "Negative rates would be very dangerous,especially for ordinary savers – the danger is many people will just think, I’m going to put the money under the mattress. That could have security risks, especially for older people.

"You don’t want your life savings out of the bank, you want them somewhere safe – but if the bank is going to charge you for keeping your money and every day you have it there it is worth less and less, you can see why people would say, I’m not going to do that."

Martin Lewis, founder at Moneysavingexpert, said: “The psychological impact of the actual money shrinking the cash terms would be huge and you would see a swathe of customers, at a level we’ve never seen before, ditching any bank that imposed negative rates. The first one to break that taboo for customers is going to face an enormous uproar."

A Natwest spokesman said: “We will consider any necessary action in the event of the Bank of England Base Rate falling below zero, but will do our utmost to protect our customers from any impacts.”

Anna Bowes, director at Savings Champion, a savings comparison service, said: "Currently you get virtually nothing on savings accounts because the big banks don't really want savers' money."

She predicted that if rates go negative there would be "at least 20 banks waiting in the wings" to obtain licences and begin offering savers higher rates, increasing competition.

She added: "Whether you are a business, and individual, or a charity you always need to be seeking the best interest rates that are available. Those pockets of competition are a lifeline for savers."

At a Glance: What Brexit would mean for interest rates


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