Stealth cuts sneak up on our savings

If you have money in a savings account, you'd be wise to check the rate - it might not be the nice little earner you thought it was.

If you have money in a savings account, you'd be wise to check the rate - it might not be the nice little earner you thought it was.

Over the past six months, providers have slashed the interest on variable-rate savings products, including internet and instant access accounts, by as much as 0.75 per cent.

This would be no surprise if the Bank of England base rate had moved during that time, but it has remained steady at 4.75 per cent since August last year. Providers, therefore, have little justification for their cuts.

Birmingham Midshires is the latest culprit, reducing its rates by up to 0.35 per cent on its instant-access account earlier this month. In March, Norwich & Peterborough and the Progressive building societies cut their rates by up to 0.25 per cent and 0.1 per cent respectively.

The month before, West Bromwich building society made a 0.25 per cent cut - a fortnight after Sainsbury's Bank sliced a huge 0.75 per cent off its rates.

Many people affected by the changes will not be aware of them because there has been no base-rate move.

"Some of the cuts are quite substantial," says Rachel Thrussell from financial analyst Moneyfacts. "But providers can be a bit sneaky - it's up to you to review your accounts and returns regularly."

Despite the cuts - and industry expectations of more to follow - there are still plenty of good rates available. The best are currently with regular savings accounts, where you are required to make monthly deposits.

Top of the table for accounts of this type is the Halifax bank, paying 7 per cent. The Progressive building society offers a decent 6.75 per cent.

Miss a payment or make an emergency withdrawal, though, and you could face tough loss-of-interest penalties.

If you don't have the discipline for regular saving, try an instant-access internet account instead. Northern Rock's Tracker Online is paying 5.41 per cent and Alliance & Leicester's Online Saver 5.35 per cent.

Alternatively, the AA is paying 5.26 per cent on its Telephone Savings account.

But watch out. Both the Northern Rock and AA accounts include a bonus that drops away after half a year or more. You'll need to stay alert and move your money when the bonus ends.