UK Edition
Savers' second blow in 24 hours: TSB cuts Classic Plus rate from 5pc to 3pc
Just one day after Lloyds announced it was halving the rate of its Club Lloyds account from 4pc to 2pc, the top paying current account from TSB has dealt a further blow to savers.
The popular Classic Plus account will no longer offer a generous 5pc on balances up to £2,000 from January 4. Instead it will pay 3pc on up to £1,500.
This means instead of earning a potential £100 in interest a year, savers will earn just £45.
Customers will still need to credit the account with £500 a month and sign up for online banking and paperless statements and correspondence.
TSB is also cutting the rate of its Enhance current account from 0.75pc to 0.25pc - twice the reduction of Bank Rate.
Customers began speculating about the future of the Classic Plus account in August when TSB began conducting internal market research that was focused on interest rates.
The bank asked savers what they would prefer - 3.5pc on £1,250, 3pc on £1,500 or 2pc on £2,000.
At the time, a spokesman for TSB refused to confirm a cut was on the cards and said: “We regularly review rates across our whole product range, and continue to assess rates given changing market conditions.”
TSB's cut announcement comes less than two months after Santander announced a rate cut on its hugely popular 123 account - the most popular of these high-interest deals, with more than four million account holders.
From November 1, customers with £3,000 to £20,000 will no longer earn 3pc on their savings which could see them earn up to £600 in a year. Instead, all savers will earn 1.5pc on balances up to £20,000.
This would still yield up to £300 a year plus up to 3pc cashback on household bills. Customers must set up two direct debits and pay in at least £500 a month. A £5 monthly fee applies.
With high interest current accounts dropping like flies, savers may be wondering if there are any decent deals left.
Nationwide offers 5pc on a slightly larger balance of £2,500. However, this is only for 12 months. Savers could earn up to £125 in that year. At least £1,000 must be paid in each month and two direct debits must be set up.
A Nationwide spokesman said: "We have no current plans to reduce the interest payable on our current accounts, although keep our rates continually under review."
Tesco Bank also offers 3pc on £3,000 which would yield £100 interest in a year. Account holders do not need to set up direct debits and there is no minimum monthly pay in. Tesco said it has no plans to reduce the rate.
The reduced Club Lloyds account will pay 2pc on balances of £5,000 from January 2017. A maximum of £100 could be earned in a year. You must pay in £1,500 a month or pay a monthly fee of £3.
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