Over a quarter of Brits losing out on thousands by saving in current accounts
More than a quarter of Brits are missing out on making any interest from their savings, according to research from a leading mutual.
Research from Shepherds Friendly found 26% of UK adults are using a current account to store their savings as opposed to an ISA.
Although there are some current accounts which pay decent interest, the amount you can save is generally limited. For example, a First Direct current account will gives you access to a linked regular saver which pays 7% interest but only up to £300 a month. Meanwhile, the best ISA – a one-year fixed rate from UBL – currently pays 5.77%, with no ceiling on its deposit.
Meanwhile, the survey also found that around two thirds (66%) of the 2,000 respondents stated they were unaware that the Government offered a 25% bonus on top of savings into a Lifetime ISA (LISA).
A LISA is a specific type of savings account which can be used to help buy a first home or for retirement.
It was launched in April 2017 and can be opened by anyone aged 18 to 39 but funds can only be accessed penalty-free to buy a first property, from the age of 60, or if the holder is diagnosed with a terminal illness with less than 12 months to live.
By keeping their money in a low-paying current account as opposed to a LISA, savers could be missing out on £1,000 extra cash on offer if they were to put the full £4,000 in that account.
Only a third of people use an ISA to save
Despite the benefits of earning interest on an ISA, only a third of those asked said that’s where they to choose to top up their savings pot.
The findings also revealed the demographics of those that are more inclined to use savings accounts. Results showed respondents aged 25-34 are losing out on the most money from saving, with 38% putting their savings directly into their current account. More men are using ISAs too, as 34% put their money into an ISA, compared to 26% of women.
People lacking financial confidence
Derence Lee, chief finance officer at Shepherds Friendly noted the importance of saving formats and how account holders can manage their finances more effectively.
He said: “As the majority of the people surveyed lacked confidence in their stocks and shares ISAs knowledge, this indicates individuals potentially aren’t using the most suitable savings vehicle for their needs.
“The best way for UK consumers to start effectively managing their money is by assessing their monthly income and outgoings. From this, they can then define what payments are necessary, which are luxury, and if they can afford to put a set amount of money into savings on a regular basis.”
Check out this week’s best savings and ISA rates roundup for the top accounts currently on offer.