‘Lloyds is leeching off my late mother-in-law’s £200k’

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Dear Katie,

My mother-in-law died in October last year, leaving her entire estate to her two daughters. I am one of the sons in law and joint executor of her estate.

Administering it is not simple because it involves multiple bank accounts, cash savings, plus a house. While inheritance tax is not an issue, probate is taking rather a long time, and has still not been granted.

None of the banks can release any of the sums to me without probate, as each balance is over their allowable threshold.

This is totally understood and accepted. However, many of the accounts are either stuck in low rate interest accounts or were fixed rate Isas that have now come to an end. These maturing accounts are being transferred into instant Isas with pitiful interest rates of 0.65pc. As an example, Lloyds and Halifax have about £200,000 and much of this is now in these low-rate accounts. 

This is galling when basic easy access savings accounts can now achieve rates in excess of 3.7pc. My mother-in-law was diligent with her savings, moving them around often to get the best rates available, and she would have been horrified at this situation.  

I did contact Lloyds today to ask if the funds could be put in accounts with more attractive rates but I was told this is not possible. I cannot help but think that banks are profiteering from our situation. Do they not have a duty of care to ensure the best possible rates are applied in these cases? 

- NL, via email 

Dear reader,

Since you first wrote to me the top paying easy access accounts are now offering interest rates of 5pc, making the 0.65pc your mother-in-law’s money is earning look even more pathetic.

Sitting where it is the money is earning around £1,300 a year, compared to £10,000 in a 5pc account, a difference of around £8,700 a year. While the probate was stalling through no fault of your own, Lloyds and Halifax, which is owned by Lloyds, were effectively leeching off your mother’s £200,000. I completely agree with you about this being unjust, so I asked Lloyds whether anything could be done to provide a better rate.

A Lloyds spokesman said: “We understand these concerns, and circumstances like this are rare. The account that a fixed rate bond rolls into when it matures is set at the beginning to give customers the greatest flexibility to move their money to suit their needs at that time.  

“Without probate being granted, and the executor legally empowered to deal with the estate, we cannot change the account on their instruction, nor can we presume to know the right account for the money where the terms are different and may limit access.”

To me this seems like an absolute cop-out. While I understand that Lloyds isn’t able to make the decision as to which new account should receive the money, surely you as an executor should be allowed to choose? And if that’s not possible, then why not design default accounts with decent rates that track base rate so savers caught like this don’t get left behind?

Circumstances like yours might be rare, but banks’ reluctance to pass rate rises on to savers in general, while happily hiking mortgage rates, is one of the biggest financial injustices of the moment. 

Lloyds and Halifax can, and should do better than this.