Alliance & Leicester is to compensate 5,400 customers whose savings accounts were "superseded" leaving them earning very low rates of interest.

After a ruling by a banking sector watchdog, the savers, who had balances totalling �62m, will receive backdated payments for loss of interest after the Alliance & Leicester's Bonus 90 account was superseded.

That account has also now been upgraded to a higher-yielding notice account.

Under the Banking Code, banks and building societies must keep interest rates on savings accounts closed to new business at similar rates to those of current products.

The Alliance & Leicester account was part of a review by the Banking Code Standards Board (BCSB) which looked at more than 50 bank and building society accounts to see if they were complying with this section of the code.

Customers benefit

Although the account required 90 day's notice, Alliance & Leicester was paying interest based on its Instant Access account - just 0.5% up to �4,999 and 1.25% on �25,000 plus.

As a result of the BCSB ruling, rates will now range from 1.75% up to 3.25%.

Customers have also been paid an additional lump sum. Interest has been backdated to September 2000.

All Alliance & Leicester customers who qualify under the ruling should now have been informed by the bank.

Seymour Fortescue, chief executive of the BCSB, said: "This is good news for these Alliance & Leicester customers."