Loyalty is a virtue usually but, when it comes to savings, it can cost you. In today’s volatile interest rate climate, sticking to your high street bank’s trusty but low-paying savings account could leave you short-changed. Top savings rates have dipped again, and the gap between what the best accounts pay and the average return can make a sizable difference to your pot.
Recent figures from MoneyFacts paint a stark picture. A year ago, the best one-year fixed bond paid 4.95%. Today, this has slipped to 4.45%. Meanwhile, the gap between short- and long-term accounts has narrowed, with the average five-year bond still paying 4.64%, unchanged from a year ago. That small difference might tempt some savers to lock their cash away for longer, especially with more interest rate cuts on the horizon.
It also means that if you’re sitting in an older fixed bond or, worse, a low-paying easy-access account, you could be missing out every month.
Caitlin Eastell, from Moneyfactscompare, warned that inflation makes the situation worse. It chips away at the buying power of your pot, so you need the best rate possible just to stand still. She said: “Loyalty is not always rewarded. Savers should be actively hunting for competitive deals, particularly if they’re getting below 3.8%.”
Challenger banks, for example, may offer better terms than the high street names you’re used to. For example, digital banks Chip and Chase are offering between 4.5% and 4.8% AER on easy access accounts respectively, which were market-leading at the time of writing. The research also found that one in four people have never switched their savings account, which is effectively guaranteeing poor returns over time.
Last year, the average account paid 3.75%, compared to the market leader’s 5%. That gap meant £120 less in interest on a £10,000 balance. With today’s top rates falling, sticking with a mediocre account could cost you even more in relative terms.
In a climate of slipping savings rates and sticky inflation, there’s no reward for staying still. Switching is quick, often easy, and as the numbers show, can add a nice sum to your annual interest. The savviest savers right now will shop around, compare deals, and be ready to move their money if they can when rates change.
Check websites such as Moneyfactscompare.co.uk for top rate savings tables.
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DEAL OF THE WEEK
Morrisons has brought back its popular wine offer just in time for festive planning – if you pick up six bottles you’ll get 25% off.
Perfect for Christmas gatherings, gifts, or stocking up for the season, the deal includes highlights from Morrison’s premium The Best range, as well as branded favourites like Moet & Chandon and Mucho Mas.
In total, the offer applies to more than 300 bottles of wine, champagne and prosecco. The deal is available in store and online for More Card holders in England and Wales until Saturday [October 12].
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Could you be one of the 2.6 million Premium Bonds savers missing out on an unclaimed prize? According to NS&I, more than £108million worth of prizes have still not been matched with the winners, and some are significantly high in value.
In Greater Manchester, for example, an unclaimed prize worth £100,000 has been sitting idle since a winning Bond was drawn in September 2010. This could be a life-changing windfall for the lucky saver if and when they’re reunited with it.
NS&I says many people lose track of their account details after moving without updating their address. The good news is that there’s no time limit to claiming Premium Bonds prizes, so you can always recover what you’re owed. To check for unclaimed prizes, visit the NS&I prize checker website at nsandi.com/prize-checker with your Bond holder number.
Old NS&I bonds, certificates, passbooks or account paperwork are often tucked away in drawers or among old documents. If you come across any forgotten savings, you can use NS&I’s tracing service to find out what might be due. Just print the form on their website and post it in.
Once you’ve tracked down any lost Bonds and winnings, it’s a good idea to update your preferences so future prizes are paid straight into your bank account. According to NS&I, this is the quickest way to ensure you don’t miss out.
