Save, make, understand money


Most savers missing out on higher rates by not switching providers

Most savers missing out on higher rates by not switching providers
Emma Lunn
Written By:
Emma Lunn

Three in ten (31%) savers never move their money to accounts with higher interest rates – with more than a third (37%) of these savers keen to ‘keep everything in the same place’, according to HBSC.

Research by the high street bank found that the typical Brit has more than £12,000 in savings, but women have £3,000 less than men. The average adult squirrels away £306 a month – 15% of their salary – with 10% managing to save more than £1,000, according to the study.

But despite 80% of those quizzed in the HSBC research describing themselves as “very savvy” or “fairly savvy” when it comes to their finances, 22% had no idea what interest rate they were earning on their money, while another 34% only had a rough idea. And even of those who do know, just 54% feel they are getting a competitive rate, leaving 37% of the rest worried they are missing out on extra income.

HSBC’s findings have been backed up by digital bank SmartSave which found many savers are remaining hesitant to switch from high street banks despite being aware that they could secure better rates elsewhere.

Only a third opening new saving accounts

SmartSave’s survey of 2,000 UK adults found that only a third (34%) have opened a savings account with a new bank or savings provider in the past two years. Of those who have not changed their bank, most (62%) said they were aware that they might be able to secure better rates with another provider.

Back in the summer, banks were forced to explain why their easy access savings rates were much lower than the Bank of England base rate.

Some easy access savings accounts still offer interest rates of just 1%, or less, while there are one-year fixed-term savings accounts offering interest rates in excess of 6%. According to SmartSave, moving £5,000 from one of the worst-performing easy access accounts into one of the better-performing one-year fixed products would earn them £250 more in interest over the course of 12 months.

However, despite the widespread knowledge that they could achieve better returns on their savings by switching providers, 46% of those who have not switched say they are reluctant to because they have held their savings with the same provider for five years or more.

Andy Mielczarek, founder and CEO of SmartSave, said: “While customer loyalty has been stretched in recent years, our research highlights that there is still a preference for the perceived ease of staying put. However, it’s important that consumers understand that looking beyond the traditional high street banks – and to fixed-term products, if it is an option for them to set savings aside for a longer period – can provide an opportunity to benefit from higher interest rates than they may currently be receiving.”

Half have no plans to switch

A third piece of research, this time by Hargreaves Lansdown, found that half (49%) of savers have no plans to switch accounts for a better deal, and only one in six plan to move in the next three months. But only just over a quarter (28%) of those staying put say it’s because they’ve already got the best possible deal. One in 10 (9%) people who have chosen not to switch say they’re waiting for rates to rise further, while a similar number (11%) said they probably should make a move, but “can’t be bothered”.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Wait-and-see savers are refusing to make a move, despite the fact the market may well have peaked. Half of savers have no plans to switch their savings from their current home – which is still overwhelmingly in easy-access accounts with high street giants, where they’re often making less than half the best easy access rate on the market – and far less than a decent fixed rate.

“When we asked people why they were staying put, one in 10 said they were waiting for rates to go higher. Unfortunately, it looks distinctly unlikely. The most competitive deals among longer fixed rates were already falling when the Bank of England paused rate rises in September, and now NS&I has withdrawn the one-year deal that was propping up that part of the market, we’re likely to see savings rates gradually drift south from here.”