TotallyMoney has investigated easy-access savings accounts, highlighting some of the worst offenders and a few of the best offers.
Experts at the credit checking site calculated that for the average savings balance of £17,365 (according to Money.co.uk), somebody on the most competitive easy-access savings rate (4.86%) could earn £844 in interest each year.
A saver earning the average interest rate offered by the big five banks (1.74%) on easy-access savings would earn just £302 per year with the same balance. This drops to £208 for the average of the lowest 20 easy-access savings rates (1.2%).
Millions of savers could be missing out on the best rates. According to TotallyMoney, one in three or 37% of people haven’t switched accounts for five years, and 27% have never switched.
With the Bank of England’s Monetary Policy Committee (MPC) expected to cut rates this Thursday, savers are being urged to make their money work for them.
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Watch out for inflation
Many savers might still be seeing their savings being eroded by inflation, even though it’s now sitting at just 1.7%.
TotallyMoney highlighted 20 of the poorest savings accounts for people who want to deposit and withdraw money without restrictions. Many of these pay interest at below the inflation rate and at a fraction of the base rate.
For example, TSB’s Save Well account pays just 0.5%, while Barclays’ Reward Saver and NS&I’s Investment Account both pay a paltry 1%.
However, there are still some accounts that will pay inflation-busting rates, meaning people can earn money from their savings while seeing it rise faster than inflation.
These include Chetwood Bank’s Easy Access Savings account, which pays 4.86%, Tandem Bank’s Instant Access Saver, which pays 4.65%, and Yorkshire Building Society’s Easy Access Saver Issue 2, which pays 4.6%.
Don’t miss out on interest
TotallyMoney calculated the difference in earnings across a variety of deposit amounts, and for a range of banks and interest rates available.
Researchers found that for a £1,000 balance, somebody with their money in the top easy-access account (4.86%) could earn £48.60 in interest each year, while this would be just £17.40 with the average big five bank (1.74%), or £12 if on a rate of 1.2%, which is the average of the 20 lowest paying easy-access accounts.
The difference is much more pronounced if you have £85,000 – the Financial Services Compensation Scheme (FSCS) limit – in a savings account. This balance would earn £4,131 on an interest rate of 4.86%, £1,479 in an account paying 1.74% and just £1,020 in an account paying 1.2%.
Alastair Douglas, CEO of TotallyMoney, said: “If you’re sitting on any savings, double check the interest rate as soon as possible. That’s because some are paying below 1%, and the average rate from one of the big five banks is currently 1.74%. However, it is possible to lock in a rate of up to 4.86%, meaning you could be earning a considerable amount more interest.
“So shop around, and find an account you can bank on. You will sometimes find that smaller banks try harder to win your custom, and will often provide better service, and pay better rates. And under the Financial Services Compensation Scheme, up to £85,000 per person and per bank, building society or credit union is protected. So you shouldn’t be too concerned if the best offers aren’t from the biggest brands.
“Loyalty doesn’t pay, but a good rate can. If you are looking to make more of your money, shop around for the best offers and consider all your options. You might be better off putting part, or all, of your money in an ISA or an account [that] requires 90 days’ notice. Just make sure it’s right for you and your needs.”
Andrew Hagger, personal finance expert at Moneycomms.co.uk, said: “Opening a new savings rate is super easy these days, so there’s no excuse to leave your savings pot with a provider giving you a raw deal. Go online and check your current savings rate today – you may be in for a shock, as your best buy deal from last year may now be just bang average or worse.
“The last couple of years have been much better if you have a half-decent savings balance – but don’t be afraid to move providers to secure a really top rate on your cash.
“It’s definitely worth taking a peek at the savings best buy tables every six months or so just to make sure your rate isn’t lagging behind.”
