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Millions miss out on £1k in savings interest as cash sits in poor-paying accounts

Millions miss out on £1k in savings interest as cash sits in poor-paying accounts
Paloma Kubiak
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Paloma Kubiak

An estimated £400bn idles in zero per cent or low paying current and savings accounts, meaning millions of Brits are missing out on £1,000 in interest.

There are nearly 13 million current accounts held in the UK with balances above £5,001. Of those who hold at least this amount, the average balance stands at £24,500.

According to Yorkshire Building Society’s analysis of CACI data, almost £400bn is held in current and savings accounts earning 1% interest or less.

However, people’s lack of understanding of the impact of their savings habits means millions are potentially losing out on thousands of pounds in interest.

The mutual also revealed that over half (55%) of savers haven’t compared the interest paid on their accounts in the last year.

And for over a third (36%), they hold most of their savings in a current account which pays little or no interest at all.

Meanwhile, half (49%) of the 2,000 people polled said they had dipped into their savings in the last 12 months.

For many, being able to access money in an emergency, like for a boiler breaking down or car repairs, is one of the reasons people don’t switch to higher-paying savings accounts. The average amount that people felt they needed to be able to access right away was £4,000.

Despite the fact that half of those surveyed said interest rates are the key driver for choosing a new savings provider, 22% said they didn’t think it’s worth moving their money.

One in five (19%) said they “couldn’t be bothered” with the hassle of moving their money and one in ten said they have never shopped around for a savings provider. Over half (53%) said they were happy with their current provider.

‘Costly mistake for millions’

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 rate, it’s surprising 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.”

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Loyalty does not always pay on savings accounts and 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.

“It is vital consumers shake any apathy by comparing the latest savings rates and moving their money to grab a better deal. The beginning of a New Year is a great time to start saving if someone does not have a nest egg to fall back on.”