Interest rates

The Treasury withdrew £600m from NatWest as savers paid rock-bottom interest rates

HM Treasury earned more than £600m in dividends from NatWest last year as savers suffered from rock bottom interest rates.

The government received £617million in dividends in 2021 from NatWest Group, which owns the Royal Bank of Scotland and Ulster Bank. However, NatWest only paid £118m in interest to savers in the year to June 30, according to analysis by wealth manager Quilter.

NatWest is 48% taxpayer owned following a bailout during the financial crisis.

Overall, the bank paid out £1.2 billion in dividends to its investors in 2021.

Kevin Hollinrake, a Conservative MP and chairman of a cross-party group on fair banking, said many customers were facing a cost of living crisis, exacerbated by low returns on savings.

“Big banks shouldn’t pay shareholders before the higher rates are passed on to savers,” he said. “It’s deeply cynical that there’s a big gap between what they charge borrowers and what they pay savers, when so many people are struggling financially.”

NatWest and other big, blue-chip banks have come under fire in recent months for failing to pass on higher interest rates to savers, despite six consecutive bank rate hikes since December. Meanwhile, mortgage rates have risen steadily, straining family budgets.

Mr Hollinrake urged the Financial Conduct Authority, the city’s regulator, to take action. “The regulator has a role to play when customers are not treated fairly.”

Anna Bowes, of savings website Savings Champion, said the discrepancy between what NatWest paid investors and what was paid to savers was “surprising”.

“This is a very serious problem: we have known for a long time that the big banks are not fair to savers,” she said. “They pay the worst interest rates in the market. Savers really shouldn’t leave money at the big banks and instead look for challenger banks that offer a much fairer rate. »

NatWest pays customers of its Instant Saver account a rate of 0.2pc, which the bank said it would soon increase to 0.4pc. However, that will still be well below the current bank rate of 1.75pc, as well as the average rate a deposit of £5,000 would earn in a standard savings account at 0.74pc, the analyst says. Moneyfacts.

A Treasury spokesman said: ‘The Government’s stake in NatWest, which resulted from the recapitalization of the bank during the financial crisis (then Royal Bank of Scotland), is managed independently on a commercial basis and all funds received dividends directly to support public finances.

“The government intends to fully divest its stake in NatWest, which has been reduced to 48%, by 2026, subject to market conditions and value for money for taxpayers.

“NatWest’s board of directors is responsible for the decisions made by the bank.”

A NatWest spokesperson said: “The strength of NatWest Group’s balance sheet and financial performance means that we are able to stand with customers, colleagues and communities in the face of the challenging economic environment while increasing our loans, investing to create a simpler and better system. banking experience and deliver sustainable returns to shareholders.

An FCA spokesperson said: “We expect companies to be transparent about how they set their prices and provide fair value products to their customers.

“Our new consumer obligation will ensure businesses put the needs of their customers first, and we will always consider the options available to us to avoid significant harm to consumers.”

Quilter said other high street banks were also likely to pay much lower sums of interest to their retail customers compared to dividends to investors, but it was not possible to accurately estimate this figure. from their accounts.