Yorkshire Building Society closes thousands of accounts paying 3.55pc

Amelia Murray
The mutual, based in Yorkshire, is closing two regular savers paying 3.55pc and 2.5pc respectively - Alan Copson ©

Yorkshire Building Society is pulling the plug on two top-paying savings accounts, slashing interest rates for thousands of customers by more than half.

The mutual is to close its Regular Saver, which pays up to 3.55pc, and its Regular Saver Issue 2, which offers up to 2.5pc.

These rates are offered to savers who make monthly deposits of between £10 and £500 for at least 11 out of 12 months a year and make only one annual withdrawal. The maximum balance allowed in these accounts is £20,000. The accounts have been closed to new business since March 2014 but 66,000 customers still have money in them.

From December 14 their cash will be transferred to a Single Access Saver account, which will pay just 1.5pc for 12 months. This is a special rate offered only to the 66,000 affected customers. Withdrawals can be made on one day of the year only. Those with the £20,000 maximum balance will earn £300 in a year in interest. 

After a year the account will change again to a Triple Access Saver, which will pay just 0.6pc. Savings of £20,300 would yield £121.80 in interest in the second year.

YBS said all customers would be notified in writing and given two months' notice.

I'm a YBS customer - where should I put my cash?

Savers may be wondering if there are any comparable alternatives.

Those with the largest balances of £20,000 will struggle to find a better option. The only current account that offers a higher return is Santander's 123 account - but only if you make the most of its cashback scheme.

Santander's 123 current account pays 1.5pc on balances up to £20,000 - the same rate as Yorkshire Building Society's Single Access Saver, although Santander allows access on more than one day a year. Customers must credit the account with £500 a month and set up at least two direct debits. 

Santander also offers up to 3pc cashback on household bills: 1pc on water and council tax bills and the first £1,000 of a month of a Santander mortgage; 2pc is paid on gas and electricity bills; and 3pc cashback is offered on phone bills, broadband and TV packages.

The bank says the average customer earns £9 a month in cashback. However, the 123 account also has a monthly fee of £5. Those with £20,000 savings who earn £9 a month cashback will earn a total of £348 a year once the fee is paid - £48 more than with the new YBS account.

If you have a smaller balance or earn less from cashback you could find that any gain is wiped out by the fee.

If you're happy to tie up funds in a fixed-rate bond you can get higher returns. For example, the top one-year bond, from Access Bank UK, pays 1.85pc, which would yield £370 in interest on a balance of £20,000. Atom Bank's two-year fix offers 2.05pc, which would yield £410 in a year.  

High-interest current accounts offer decent returns, but only on small sums. Nationwide's Flexdirect current account pays 5pc for a year but only on balances up to £2,500. Customers would earn just £125 in interest in 12 months. The rate drops to 1pc when the year is up. The account must be credited with £1,000 a month.

The top regular savers offer up to 5pc interest - but this is only for a year and on small monthly deposits. The accounts also don't usually permit access during the year and you often have to open, or already have, a current account with the provider.

For example, First Direct's regular saver pays 5pc but customers can pay in a maximum of only £300 a month. You must have a First account from which to make the monthly payments.