The Sainsbury’s Isa loyalty penalty grows to £692 as it continues not to auto-raise easy-access rates

Savers with a variable rate Isa at Sainsbury's Bank are still being caught out by the sneaky terms.

Unlike most savings providers, the bank does not automatically apply new rates if they are improved.

Instead, savers should check online to see if the rate has increased and then request that rate be applied to their Isa.

A This is Money reader discovered they could get a rate of 4.91 per cent, but were instead stuck with a paltry 1.45 per cent because they didn't know they had to constantly check for and apply for higher rates.

On a savings account of € 20,000, this is an interest difference of £692.

At an interest rate of 1.45 percent, a saver with £20,000 would receive £290 interest. But at an interest rate of 4.91 per cent this would rise to £982, more than triple the interest amount at the lower interest rate.

This is not a new problem; We've reported on this sneaky tactic before, where variable rates are seemingly not variable.

Savers caught in this way may be punished even more severely than before, due to interest rate increases in the past year.

It is one of the tricks that banks use to prevent interest rate increases from being passed on to savers.

Last summer, some savers were paid 0.3 percent and did not automatically receive a bonus from Sainsbury's.

And in March, with our sister title Money Mail, we highlighted how Sainsbury's was the bank that won't pass on interest rate increases unless you call and ask.

Savers who have Sainsbury's defined access account have also faced difficulties. Those with this account are forced to open a new issue of the defined saver and close their current one to get a better rate.

The way it works for variable money Isa customers is that they need to contact the bank via telephone or a secure message in online banking to have their rates updated to the current retail rates.

One customer told us: 'I have had a variable Isa account with Sainsbury's Bank for a number of years. Yesterday I received a letter saying that my interest rate is currently 1.45 percent, but that if I checked online I “might be able to get better rates.”

'The letter did not state which rates were 'possible'.

'I went online and was shocked to discover that the rate I was entitled to was 4.91 per cent. I called the bank and was told that customers should always check for themselves if rates changed, and then ask for an upgrade.

'This was news to me, but I was sure it was in their terms and conditions.

'I'm so furious. What should older customers do if they don't go online? It's likely that many of these small savers are the ones who need increased interest rates the most. And how can Sainsbury's Bank even call this a variable account if it doesn't change automatically?

There is a section on the Sainsbury's Bank website under FAQs called 'How do you advise me on rate changes' and it says: 'Each time we change our rates we will: update our website or write to you.'

In the conditions, the bank says in the event of an interest rate increase: 'We may increase your interest without informing you in advance.'

A rate reduction will be applied automatically.

We contacted Sainsbury's Bank about this to ask how the variable rate is applied to customers with this type of Isa and whether this was clear to customers on their website.

A spokesperson for Sainsbury's Bank said: 'We continually assess the market to ensure we offer our customers a competitive range of savings products.'

Andrew Hagger, founder of personal finance website MoneyComms, says: This seems like a long-standing problem.

'If rate increases are only implemented for new customers, it seems unfair that existing customers do not benefit from similar rate increases unless they explicitly request them –

The FCA launched its 14-point action plan for cash savings on July 31 – point 11 of that plan stated: 'The FCA expects firms to take action to encourage their customers with lower paying savings accounts to consider alternatives' – at the moment it seems this does not appear to be the case. works and does not seem to fit well with the rules of the consumer duty to provide 'fair value'.'

James Blower, founder of Savings Guru, said: 'Unfortunately this is a Sainsbury's tactic.

'It refers to this in the application process, where it says: 'If you already have an existing Isa and want to apply for a new Isa rate, you should not apply. Click here to send us a request to have your rate updated.' '

'What Sainsbury's is doing is paying new customers a better rate to bring them in, but not passing on the same rate to previous customers – so existing customers get a worse deal unless they contact Sainsburys to get the new rate.

'Sainsbury's is doing this purely to maximize its profitability – because it knows many existing customers won't notice, and those who do will assume they will also get the higher rate, not that they need to take action. the understanding.'

'There are banks that operate in a similar way and use issue numbers, such as Cynergy, which create a new 'issue' with a higher rate rather than increasing the rate for everyone.

'For example, Shawbrook also uses issue numbers, but their latest easy-to-access issue actually has a higher rate (5.11 percent) than the current one (5 percent), so issue numbers are not always used negatively for savers.'