Brits have £400bn sat in low interest bank accounts - where to put your savings
A warning has been issued as nearly £400billion is currently sitting in bank accounts earning only 1% of interest or less.
Analysis from Yorkshire Building Society and data consultancy CACI has revealed that around £380.9billion is estimated to be sitting in current accounts and instant access non-Isa savings accounts paying between nothing and 1%.
The research also indicated there are nearly 13million current accounts held in the UK with balances above £5,001. This means millions of Brits could potentially be missing out on hundreds of pounds worth of cash earned through interest.
The Bank of England currently has a base rate of 5.25% which should have dragged up the interest rates offered on banking and savings products offered by banks. Initially, banks were slow to pass on the raised rates, however after a warning from MPs and the Financial Conduct Authority (FCA), banks started to up their game.
A survey of 2,000 people for Yorkshire Building Society found that more than half (55%) of savers have not compared the interest paid on their accounts in the past year. Nearly half (49%) of people surveyed also said they had dipped into their savings in the past 12 months. The average amount that people felt they needed to be able to access right away was £4,000.
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Separate figures from the financial data company Moneyfactscompare.co.uk show that on Wednesday this week, the average easy access savings rate on the market was 3.16% while the average one-year fixed savings rate sat 4.76%.
Chris Irwin, director of savings at Yorkshire Building Society, said: "Despite savings interest rates getting a lot of attention over the last year, following the significant increases in the (Bank of England base) rate, it's surprising that there are still large pockets of people who are significantly missing out on savings interest - shopping around can now make a substantial difference to the returns available.
"Keeping large amounts of funds in low-paying current accounts has become a costly mistake for millions. It's understandable to want to have money accessible for emergencies or even topping up everyday expenses, but with so many instant access savings accounts currently available in the market paying a much higher return, there has never been a better time to review the home of your savings.
"Reviewing finances and savings can sometimes be an afterthought, with other things in life taking priority, however, the start of a new year provides the perfect opportunity to take a close look at your finances and increase awareness of your situation and from there look at how you could make small changes which add up to much bigger returns."=
Rachel Springall, a finance expert at Moneyfactscompare.co.uk said that "loyalty" often does not always pay on saving accounts, adding: "The convenience of using a current account is costing consumers in interest they could earn elsewhere, as many bank accounts pay little or no interest."
Recently, Martin Lewis' Money Saving Expert (MSE) website shared the exact rate you should be getting on your savings - and said you "shouldn't accept any less.". In a recent MSE newsletter, Martin's team urged savers to make sure they are getting at least 5.2% interest on their savings.
They said: "Rates continued to rise for much of 2023, though a hold in the Bank of England base rate led to a dip towards the end of the year. Overall, it's a good time for savers to check what they're earning - if it's less than 5.2%, it's time to ditch & switch."
The best easy-access rate at the time of writing is 5.22% from Metro Bank, and the best-paying fixed rate account is from Investec, which pays 5.3% fixed for one year. If you're able to give notice on when you want to withdraw your savings, Monument Bank pays 5.41% but you need to let them know 60 days before you want to make a withdrawal.
Regular saving accounts pay even more than this - but you're normally limited to how much money you can save each month. Nationwide has launched a linked saver which pays 8% fixed for one year - but you can only deposit up to £200 each month.
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