‘Staggering’ £265bn languishes in accounts paying ZERO interest: Act now
A huge £265bn sits in cash accounts paying no interest at all. Here’s how to make every penny count by switching, or you could join a cash saving club which takes out some of the legwork for you.
In February 2022, £265bn languished in non-interest bearing deposit accounts, according to Bank of England data.
This figure has more than doubled in the past decade, up from £113bn in February 2012.
Further, £983bn remains in easy access accounts with a large chunk of this cash likely sitting in accounts with high street banks earning as little as 0.10%, Savings Champion says.
Indeed, research from Investec reveals that the average top 10 best buy easy access savings accounts pay 33 times more than the average easy access savings rate paid by the UK high street banks.
It gave the average rate offered by banking giants as 0.02%, compared to the average top 10 rate at 0.67% in February.
“You could be earning up to 1.5% AER from the best easy access account now and over 2% in the best one-year fixed term bond”, Anna Bowes, co-founder of Savings Champion says.
She adds: “There’s a staggering amount of money sitting in easy access accounts which earn some of the lowest rate available – and more worrying is the amount in accounts that pay no interest at all – so presumably current accounts.
“Many people may be leaving cash in easy access accounts in order to access it in a hurry if an investment opportunity or better savings rates comes along, or they know they will need it in the short-term.
“But there could also be those who have simply left their cash languishing with their high street provider, assuming that their loyalty will be rewarded. Unfortunately, this is not the case.
“Although the base rate has now risen three times since December, by a total of 0.65%, most high street easy access accounts have risen by just 0.09%, so they are paying just 0.10%. That’s £10 a year in interest for every £10,000 deposited.”
The top cash savings rates
For savers looking for the best rate on an easy access account, US banking giant JPMorgan launched the Chase saver account paying a market-leading 1.50% AER (variable).
While technically it’s a linked saver account – so you need to open a current account with Chase to get the rate – you won’t need to shut your main or existing current account to be eligible.
On a £1,000 deposit (no withdrawals) you would earn £15 in interest over the year.
For First Direct customers with a current account, from tomorrow (Thursday 28 April), it will increase the interest rate on its regular saver from 1% to 3.5% AER/gross – one of the highest rates in this category.
Based on the maximum £300 per month deposit over the course of a year (£3,600), savers could earn £68.25 in interest, it says.
New current account customers (via the Current Account Switch Service) can currently receive a £150 bonus. Those who just open an account, but not through CASS will receive £20.
On notice accounts, OakNorth Bank and Oxbury both pay 1.53% AER/gross for savers who can give 120 days’ notice before needing access to their cash. The minimum deposit amounts are £1, and £1,000 respectively.
Turning to fixed rate bonds, Savings Champion data reveals the best one-year product pays 2.10% AER/gross from Flagstone, though it requires a minimum £10,000 deposit and is online only.
Kent Reliance pays a lesser 2.05% AER/gross but is for savers with £1+ to deposit, and it can be opened and managed online, in branch and by post.
Meanwhile, Virgin Money tops the chart with its 2.02% AER current account in-credit interest on a maximum £1,000. The M Plus account is currently offering 20,000 Virgin Points for new customers going through CASS.
Every month YourMoney.com publishes The top savings accounts paying the most interest where you can find the latest best buy deals from data supplied by Savings Champion. Sign up to the YourMoney.com daily newsletter to get this information straight to your inbox.
Could cash savings clubs work for you?
Cash savings clubs or hubs offer customers a ‘one-stop-shop’ solution to take the hassle out of switching between providers to chase the best rate.
They’ve been around for a decade but have come to the fore in recent years, according to James Blower, founder of The Savings Guru.
However, he says they’re “still tiny” in the scheme of the market with overall balances of around £12-£15bn, against a savings market of £1.7trn.
The biggest two savings club are offered via Flagstone and Hargreaves Lansdown, with the latter launching Active Savings in 2018.
The investment platform allows savers to pick and mix from 34 savings products offered by 15 partner banks and building societies by opening an online account.
It told YourMoney.com it has seen a 57% increase in clients using the Active Savings cash platform in March 2022, compared to the beginning of the pandemic in March 2020.
Tom Higham, head of HL Active Savings, says: “Savers are being hit by the double whammy of the cost of living crisis and the big banks denying reasonable rates of interest and as a result, it’s increasingly important to get your money working. We’re seeing more people switched on to the impact of leaving their savings languishing with the high street bank they have a current account with when there are much better options out there.
Cash savings platforms get your savings working harder, by bringing together the banks and building societies prepared to offer much better interest rates, and also allowing people to spread their savings across multiple brands to benefit from greater FSCS protection through one simple log in.”
AJ Bell also added further products to its Cash Savings Hub last week, with its head of personal finance, Laura Suter, warning that while no cash savings rates will match inflation, “it’s important to make sure your cash is working as hard as possible and in the highest-rate account so that its spending power isn’t eroded so quickly”.
“Pros and cons of different cash savings clubs”
Other big players in the market, according to Blower, include Raisin and Insignis and while Aviva is a household name, its Aviva Save hasn’t matched competitors.
He says there are pros and cons of all the different cash savings clubs, but the main thing to look out for is who is paying for the platform.
“They are split between those where customers pay (Flagstone, Insignis) and where the banks pay to be on the platform (Hargreaves Lansdown, Raisin and Aviva Save),” he says.
He adds: “Flagstone has some providers, products and rates that are not available from banks direct. Raisin has some banks on its platform which do not have a direct business in the UK i.e. you can only save with them through the Raisin platform.
“The big benefit with all of them is it is one sign up (to the platform) to save with as many providers and in as many accounts as are available on the platform – rather than having to open new accounts and go through account opening with the banks direct.
“Also, if you have more than £85,000, they offer a convenient way to maximise FSCS allowances across banks.”
Another point for savers is to look for the minimum balance as this can vary wildly from £1,000 to £50,000. It’s also important to check how many banks it includes as none of them have every bank on their platforms.
He also suggests customers look out for special sign up offers. Raising is currently paying a £30 sign up bonus.
Blower concludes: “I think the platforms will continue to grow strongly and will play a key part in the savings market going forward.”