Half of retirees get a low return on savings due to low-interest accounts
- Many of those 65 and older are missing out by keeping their money on low-interest deals.
- Half keep their cash in accounts that pay less than 3 percent interest per year
At least half of retirees lose hundreds of pounds in interest each year by keeping their money in savings accounts that pay less than 3 percent.
Savers past retirement age are particularly likely to leave money in lower-interest accounts, according to online pension provider PensionBee.
PensionBee research reveals that 42 per cent of British retirees aged 66 to 80 have substantial cash savings, ranging from £20,000 to over £200,000 each.
This means that putting their cash into a high paying account could net them thousands each year.
Meanwhile a quarter of working-age adults in Britain have less than £1,000 in cash savings, and only 17 per cent of this group have more than £20,000.
Lack of interest: Many people over the age of 65 keep their cash in savings offers that pay interest below the average
Almost half (42 percent) of those 65 and older reported earning 3 percent or less on their savings.
Meanwhile, more than one in six (17 percent) of workers and retirees didn’t know the interest rate currently being paid on their savings, meaning they may be missing out on the higher rates.
Those 65 and older seem to prefer the convenience of instant access accounts, which tend to pay less interest than other forms of savings arrangements, such as fixed-rate bonds.
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The best easily accessible account, from the Furness Building Society, pays 5 percent interest a year, though savers can only make three withdrawals in that time.
Meanwhile, the top fixed-rate bond, from Smartsave Bank, pays 6.01 percent.
More than half (59 percent) of retirees use instant access offers, compared to 37 percent of working-age savers.
Becky O’Connor, director of public affairs at PensionBee, said: ‘The older generation has the most to lose if they keep money in an account that doesn’t pay a competitive interest rate. Unfortunately, it appears that a large proportion are missing out on the best savings rates.
“When choosing accounts, there are hundreds of pounds of interest a year at stake for retirees, who have generally accumulated more substantial savings over the years than younger workers.”
A retiree with a £50,000 savings balance in an account paying 2 per cent interest would earn £1,000 in interest after one year.
If their cash was held in an account with a 5 per cent rate, they would receive £2,500 in interest after one year, a difference of £1,500.