A third of UK adults are unaware what interest rate they're getting on their savings, research reveals.
This is more common in women than men, with 37% not knowing what rates they have, compared to just over a quarter (27%) of men.
Of the 2,000 people polled by investment platform Hargreaves Lansdown, almost half (48%) of renters were in the dark over what interest rates they were getting on their cash, while the figure for singletons came in at 41%.
With an increase in caring responsibilities more likely in middle age – either for parents or own children – plus depending on how busy our lives are, it can be easy to lose track of finances.
Keeping up with interest rates can be low on the priority list, which is why 38% of those aged 35-54 don’t know what their savings are earning.
But, younger people (aged 18-34) who generally have less in savings were found to be more knowledgeable on how much interest their cash is earning. Just a third couldn’t answer what their interest rate was.
And when it comes to inflation, those who couldn’t correctly answer what impact it has on their savings, also tend to fare worse in terms of financial resilience. Here Hargreaves Lansdown revealed 47% of those who didn’t attempt to answer the question were also unaware of what interest they’re making.
Double your interest in just one move
The knock-on effect of not knowing what interest your money is earning can result in the loss of thousands of pounds, depending on the size of your savings pot.
This can happen when cash sits in a low-rate account, with the savings not being as big as it could be with a higher rate.
For others, they may underestimate the amount of interest they’ll earn and could trigger a tax bill. This is because of the Personal Savings Allowance which allows basic rate taxpayers to earn £1,000 in interest before tax, while higher rate taxpayers have a £500 threshold.
For years, tax on savings wasn’t a concern amid the low rate environment. But now, if a higher rate taxpayer has £8,500 of savings earning 6% AER, you’ll pay tax on it unless you’re saving in an ISA.
The platform has urged savers to keep on top of their rates and shop around for the best deals, warning “if you don’t know what you’re making, you’ll never know what you’re missing out on.”
‘Paying the price’
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “While it’s hard to keep tabs on every aspect of our financial lives, there’s a risk that we’re paying the price for being in the dark about savings rates.
“If you don’t know the interest rate, you could be paying the price in all sorts of ways. You won’t know whether the account is competitive, or whether you could get a much better rate by moving your money. If your savings are languishing in an easy access account with a high street giant, you might well be able to double your interest by making a move.
“The first step is to check the rate on every savings account you hold. If you have multiple accounts and struggle to keep track of them, you can either consider consolidating them into the one with the best rate – assuming they’re accounts of the same type and not more than the FSCS protected amount of £85,000. Alternatively, you can consider a cash savings platform, which enables you save different types of account with different banks, and keep an eye on them all in one place.”
Related: This week’s top savings deals
