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Rip-off warning on 'over-50s' savings accounts

Savings accounts aimed at the over-50s are a "rip off" because they are often have worse interest rates than the ones for people of any age, according to new research.

Millions of older savers and investors are often tempted by bank accounts aimed at the mature market because they assume that these offer better interest rates than all-round products.

However people's savings would do just as well, and usually better, if they simply stuck to the same products as everyone else, said a report study by Governor Money, an investment advice firm.

Its (Euronext: ALITS.NX - news) research found that the top 20 savings accounts aimed at so-called 'silver savers' pay out annual interest of around 2.23 per cent on savings.

Meanwhile the top 20 accounts overall pay an average of 3.17 per cent, no matter how old the account holder is.

The difference means that £5,000 in an account aimed at senior savers would earn average interest of £111.50 over a year but one aimed at everyone would pay interest of £158.50.

The findings shows that general accounts are generally better for mature savers than accounts aimed specifically at them, Governor Money said.

The survey will increase fears that some banks and building societies are looking to take advantage of the over-50s.

There are an estimated 21 million people aged over 50 in the UK and this age group controls over 70 per cent of the cash savings in the country.

Miles Bingham, chief executive of Governor Money, said that products aimed at the older market usually carry some kind of extra benefit, such as car insurance which recognises that older drivers are often safer and therefore entitled to premiums cheaper.

However he said that is not true of cash savings bank accounts.

Mr Bingham said: "The recent Budget and subsequent "granny tax" controversy shed the spotlight on the finances of older people. Labelling products as exclusive for the over-50s usually implies they come with some benefit or additional value not available to the public at large.

"But our research demonstrates that this is clearly not the case currently when it comes to savings."

He said that if older savers only looked at age-specific accounts, they would be ignoring 93 per cent of the available accounts out there, including many that offer better terms.

"Governor Money's analysis of over-50s savings accounts suggests that older savers should treat such products with a high degree of caution and not limit their options.

"Over 50s shouldn't be drawn into choosing a product because it appears to be tailored for their age group," he said.

There are around 43 different variable-rate bank accounts available for over-50s in the UK, offered by 22 different providers.

Last year, advice website warned that banks and building societies targetted the over-50s during the credit crisis as they were seen as easy prey for banks looking to increase their retail deposits.

The company said: "During the credit crunch, banks needed to raise retail deposits from retail savers.

"Many targeted the over-50s group for obvious reasons: they tend to have more disposable savings as, in many cases, the children will have left home, the mortgage will be virtually paid off and, with retirement approaching, many do not want to take undue risks with their capital but still need a reasonable rate of return."

However advised people that if they solely considered accounts for over-50s they would be "likely to miss most of the best-paying accounts around".

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