Millions of Britons could be losing hundreds of pounds each year by keeping their savings in the wrong bank accounts. Last year, research revealed that 13 million current accounts in the UK hold balances over £5,001, with an average balance of £23,600. As a result, many savers are missing out on interest they could have earned by moving their funds into a savings account.
While the average high street easy-access account offers 2.84% interest, top accounts can pay as much as 5%. This means that by not switching, someone with £10,000 in their current account could be losing £208 in potential interest over the course of a year, assuming interest rates stay the same. Focusing on near-retirees, Shawbrook Bank found that one in four people aged 55 to 68 have more than £3,000 in a current account, and nearly 10% are holding over £9,000 in one.
With 34% of near-retirees relying on their savings for retirement, experts suggest that using higher-interest accounts could help preserve and grow their savings as they approach retirement.
Adam Thrower, head of savings at Shawbrook Bank, said: “It is shocking to see the level of deposits being held in current accounts.
“Doing this might seem like the easy option, but people could be throwing away hundreds of pounds a year. Current accounts, not designed for savings, typically pay low interest rates – or none at all.”
There are many different savings accounts with differing benefits. For example, fixed-rate accounts lock in higher interest rates for a set period but don’t allow withdrawals, whereas easy-access accounts typically allow people to dip into pots penalty-free.
Choosing the right one depends on your savings goals and financial situation. We’ve collated the top savings accounts and cash ISAs for March here.
However, savers are being urged to lock in the top rates while they can. The Bank of England dropped the Base Rate from 4.75% to 4.5% in February, and providers have quickly responded by cutting rates.
Rachel Springall, finance expert at Moneyfacts, said: “The months ahead will be challenging for providers to keep ahead of their peers to entice new business, but also to adjust their rates as interest rates are expected to fall.
“Whichever account savers choose, it’s imperative they review their pots. Savers must ensure they choose a deal which pays a competitive rate of interest but also provides a real return against the eroding impact of inflation, which is expected to rise this year.”
