Savers miss out on £20bn in interest payments
New research from Hargreaves Lansdown shows that 85% of money in non-ISA savings accounts is in easy access account, which are typically the lowest paying. Equally, many (71%) are sticking with the high street banks, where rates are less competitive.
The research shows a typical high street easy access account pays 0.25%, against an average rate of 0.43% and a top rate of 1.5%. At the same time, the average rate on a three year bond is 1.47% and the best is 2.64%.
Sarah Coles, personal finance analyst, Hargreaves Lansdown, said: “Savers are squandering £20 billion a year by parking their cash in easy access accounts with the big high street banks. 85p in every savings pound is held in easy access accounts and 60p of that is with the big high street banks – where a typical rate can be around half the average – and one sixth of the best on the market.
“Cashing in on the extra interest doesn’t have to be time-consuming or complicated. If you have a typical easy access account you can switch to the most competitive one and make six times more in a year. Alternatively, you could take out a fixed rate for the period of time that suits you best, and make up to 12 times as much.”
Uncompetitive easy access
Coles said that savers don’t need to keep all their spare cash in an easy-access savings account: “The best approach is to keep some of the cash in easy access for emergencies, and tie the rest up for the periods that suit you best. If, for example, you had £10,000, you could put £5,000 into an easy access account and fix £5,000 for three years and make eight times the interest as you’d get from leaving it all in an uncompetitive easy access account.”
Hargreaves Lansdown calculations showed that there is £915,631 million in easy access accounts, £646,684 million of which is on the high street. If it all earned a typical current high street rate of 0.25%, it would earn £2.3 billion in interest in a year. If it was in the average two year fix it would make £8.3 billion more a year, or £23.4 million a day. If it earned the highest interest rate on a two-year fix it would make £19.7 billion more a year, or £55.8 million a day.