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| Not just any Isa rate cut – M&S takes scythe to best-buy deal | Not just any Isa rate cut – M&S takes scythe to best-buy deal |
| (9 months later) | |
| Savers who deposited their money in Marks & Spencer's top paying 3% cash Isa last autumn might be wondering why they bothered, after the bank said it is cutting the interest it pays for the third time in just six months, slashing the rate to 1.3%. | |
| Back in October, the Advantage cash Isa had one of the best rates on offer, but the series of cuts have seen it turn into a distinctly poor one. M&S, which launched a banking operation promising the "same quality, service and trust you expect from M&S", has left sensible account holders looking for another bank or building society to put their money. | Back in October, the Advantage cash Isa had one of the best rates on offer, but the series of cuts have seen it turn into a distinctly poor one. M&S, which launched a banking operation promising the "same quality, service and trust you expect from M&S", has left sensible account holders looking for another bank or building society to put their money. |
| Several experts recommended the product on its launch, and the money poured in from customers looking for a big name institution they could trust. M&S was overrun by applications and at one point it was all but impossible to get through to the call centre. | Several experts recommended the product on its launch, and the money poured in from customers looking for a big name institution they could trust. M&S was overrun by applications and at one point it was all but impossible to get through to the call centre. |
| Journalists had been previously briefed that the bank would not be an institution that would offer high teaser rates only to cut them a few months later. However, that is exactly what has happened. | Journalists had been previously briefed that the bank would not be an institution that would offer high teaser rates only to cut them a few months later. However, that is exactly what has happened. |
| Even before the company had sent out confirmation letters to new customers it cut its rate to 2.75%, with the change taking effect on 11 December. At the time, most savers stomached the loss and left their money where it was figuring it wasn't worth the hassle to move. But just a few days later, in early January, the bank again wrote to customers warning them the rate would fall for a second time to 2.25%, this time on 6 March. | Even before the company had sent out confirmation letters to new customers it cut its rate to 2.75%, with the change taking effect on 11 December. At the time, most savers stomached the loss and left their money where it was figuring it wasn't worth the hassle to move. But just a few days later, in early January, the bank again wrote to customers warning them the rate would fall for a second time to 2.25%, this time on 6 March. |
| That blow was further compounded when, on the day before that rate cut had been exacted, M&S wrote to customers for a third time saying that the rate would fall to just 1.3%. This change will take place on 10 May. | That blow was further compounded when, on the day before that rate cut had been exacted, M&S wrote to customers for a third time saying that the rate would fall to just 1.3%. This change will take place on 10 May. |
| Some of the cuts were inevitable given the general fall in cash Isa interest rates that many blame on the government's Funding for Lending scheme. But other best-buy Isas have not fallen by the same rate as the M&S one: Virgin's Easy Access Cash Isa Issue One, for example, has fallen from 2.85% to a respectable 2.4% over the same period. | Some of the cuts were inevitable given the general fall in cash Isa interest rates that many blame on the government's Funding for Lending scheme. But other best-buy Isas have not fallen by the same rate as the M&S one: Virgin's Easy Access Cash Isa Issue One, for example, has fallen from 2.85% to a respectable 2.4% over the same period. |
| Anna Bowes, director of the Savings Champion website, says savers who opted for the M&S account have ended up suffering far more. "The rate cuts being applied to the M&S Advantage Isa are shocking and out of proportion to the rest of the market. This is a terrible example of a provider luring in savers with a competitive rate, only to pull the rug from under them. | Anna Bowes, director of the Savings Champion website, says savers who opted for the M&S account have ended up suffering far more. "The rate cuts being applied to the M&S Advantage Isa are shocking and out of proportion to the rest of the market. This is a terrible example of a provider luring in savers with a competitive rate, only to pull the rug from under them. |
| "The fact that M&S has been so transparent in letting savers know about the rate changes is cold comfort to them, as they now need to transfer their account to earn a decent rate of interest." | "The fact that M&S has been so transparent in letting savers know about the rate changes is cold comfort to them, as they now need to transfer their account to earn a decent rate of interest." |
| Meanwhile, Bowes warns that it's not just Isa savers who have felt the effects of the "M&S scythe". | Meanwhile, Bowes warns that it's not just Isa savers who have felt the effects of the "M&S scythe". |
| "Those who invested in the Everyday Savings Account will also see the rate they are earning fall by 1% on 12 April. If they opened their account before 3 January the 1% bonus will continue to apply, but when it ends after 12 months the rate they are earning will have plummetted from 2.35% to just 0.35%," she says. | "Those who invested in the Everyday Savings Account will also see the rate they are earning fall by 1% on 12 April. If they opened their account before 3 January the 1% bonus will continue to apply, but when it ends after 12 months the rate they are earning will have plummetted from 2.35% to just 0.35%," she says. |
| A spokeswoman for the bank declined to go into reasons for the rate falls, except to say they were "a result of increasing market pressure downwards on borrowing and savings rates over recent months". | A spokeswoman for the bank declined to go into reasons for the rate falls, except to say they were "a result of increasing market pressure downwards on borrowing and savings rates over recent months". |
| M&S Bank, which is wholly owned by HSBC, runs on a profit share with Marks & Spencer plc. It promised last July to herald a new era for banking and aims to open 50 bank branches by the end of the year. | M&S Bank, which is wholly owned by HSBC, runs on a profit share with Marks & Spencer plc. It promised last July to herald a new era for banking and aims to open 50 bank branches by the end of the year. |