Customers holding cash in legacy savings accounts are facing a direct hit to their returns as major banks reduce interest rates, with watchdogs warning that loyalty is costing savers hundreds of pounds annually.
The move comes as financial institutions lower base rates, betting that inertia will keep funds in place rather than prompting customers to switch to higher-yielding alternatives.
Rate scrutiny firm Moneyfacts has highlighted the growing disparity between the rates offered to new customers and those retained by existing account holders.
While new money attracts competitive promotional yields, legacy balances are increasingly subjected to rate cuts, effectively penalizing long-term loyalty.
The financial impact is substantial for those with significant nest eggs, as the compounding effect of lower yields over a year can result in hundreds of pounds in lost income.
This dynamic plays out against a backdrop of tightening household finances.