A fifth (21%) of savers refuse to put their funds in accounts with specialist or challenger banks as they think their savings are safer with a mainstream bank, according to research by Shawbrook Bank.
But smaller or challenger banks often pay much higher interest than high street brands. An account holder saving £10,000 could lose £255 a year by sticking with a big name bank, the bank’s study shows.
With ISA season in full swing, savers who limit their options to familiar names risk earning less than they could.
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Choosing a higher rate with a challenger bank doesn’t have to mean sacrificing security.
Any UK bank or building society signed up to the Financial Services Compensation Scheme (FSCS) protects deposits up to £85,000 per person, per institution. This means savers benefit from the same level of protection whether they choose a well-known bank or a specialist provider.
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A third (34%) of savers say that higher interest rates would be a key factor in prompting them to open a new account, so overcoming any trust gap is essential, according to data from Shawbrook.
Paul Went, managing director of Savings at Shawbrook, said: “Savers no longer have to settle for lower rates. While specialist banks might not have the same name recognition as some mainstream banks, they can be the best-kept secret for those looking to make their money work harder. Inflation is increasing again, so every pound of interest earned matters.
“With 1.55 million ISA accounts maturing before between February and the end of April, according to our analysis of CACI data – now is the time to start looking at new accounts and using up any remaining ISA allowance. By broadening their search beyond the brands they already know, savers really can have their cake and eat it too.”