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Savers missing out on £1bn interest by leaving money in accounts paying nothing

Joanna Faith
Written By:
Joanna Faith

Savers are missing out on more than £1bn by leaving cash languishing in accounts paying no interest at all.

The longer money sits in an account, the lower the rate tends to drop as banks offer better rates to new customers.

With £246.5bn sitting in accounts paying nothing, savers could make £1.6bn in interest simply by switching, according to Hargreaves Lansdown.

However, a survey by the investment firm found fewer than a third of people have switched accounts in the past 12 months, while half haven’t switched for five years or longer or have never switched at all.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “It’s easy to see why people don’t think it’s worth the effort of switching while rates are so low.

“But rates have picked up in recent months, so if you’re earning next to nothing in a miserable high street savings account paying 0.01 per cent, you could make 65 times the interest by switching to the most competitive easy access rate on the market, or 150 times the interest by tying your money up for a year.”

Coles added that the gap between the interest available on easy access and fixed rate accounts is starting to open up again.

The most competitive account fixed for a year is now paying more than twice the best easy access account.

“Over the past few years, we have overwhelmingly put money into easy access accounts instead of fixed rate accounts,” she said.

“But while this is absolutely the right place for your emergency savings of 3-6 months’ worth of expenses, and any money you know you will need in the immediate future, it’s a missed opportunity for the rest of your savings.”

The best easy access rate at the moment is 0.65 per cent from Tandem Bank.