One-third of savings held in easily accessible accounts continue to earn 1 percent or less in interest despite rates reaching the highest levels since 2008.
The figures, based on savings balances from 34 leading providers compiled by CACI, show that many savers are being ripped off at a time when savings rates have risen rapidly.
The Bank of England base rate has risen from 0.1 percent to 5 percent in the space of 18 months.
The average easy-access rate now pays 2.61 percent, according to Moneyfacts, while the best deal on the market currently pays 4.55 percent. Check out the best easily accessible deals here.
A third of savings held in easily accessible accounts earn 1 percent or less in interest despite rates reaching the highest levels since 2008.
However, some of the larger banks in particular continue to offer savings accounts that pay 1 percent or less.
Recently both the government and FCA have been trying to put pressure on the worst culprits to pay their savers fairly.
Accounts with large balances also earn negligible returns, given the potential for significant returns now.
More than a quarter of all cash held in easily accessible accounts (both Isa and non-Isa) earn 1 per cent or less and have a balance greater than £10,000.
This equates to £205bn across CACI’s 34 leading providers, meaning considerable money is lost in significant interest rates.
By volume, that equates to nearly one in 10 easily accessible savings accounts, or six million.
A saver with £10,000 in an account earning 1 per cent per annum would earn £100 of interest over the course of a year.
Someone putting £10,000 into the market-leading 4.55 per cent offer could expect to earn £455 over the course of a year.
Derek Sprawling, director of savings at Paragon Bank, said: “Given that rates have been rising on fixed and instant access accounts for over a year, it is still surprising that more than three in £10 on an instant access account earn 1 per cent or less.”
‘What’s even more astonishing is that those with significant balances of £10,000 or more in their account get low rates of return. I urge savers to search the market for better paying accounts.’
Why are savers leaving their money festering?
James Blower, founder of the Savings Guru website, says many savers leave their cash languishing in low-paying accounts, often out of blissful ignorance or convenience.
Says Blower: ‘I think some savers are blissfully unaware and just assume that as rates rise they are benefiting.
“I think some can’t be bothered because they don’t think it’s worth the trouble, when in reality they’re missing out on four times the interest they could be earning.
“Some leave it knowingly and some don’t know that rates have gone up as much as they have. There are a multitude of reasons.
“Many still keep their current account provider for convenience, and these are some of the worst offenders.”
Unsurprisingly, his advice to those who keep leaving their cash in these accounts is probably a no-brainer. Change. Even if it seems useless to do so.
Blower adds: “Even a relatively modest amount of savings could net you much more: £5,000 in the best paying easy access. Isa gets £210 in interest and £278 in the best fixed payment.”
“In the non-Isa ordinary accounts, it’s £277.50 and £307.50, so they’re not insignificant sums.”
The trend towards fixed-rate savings
While many savers are leaving their cash languishing in accounts that pay paltry returns, some have been avoiding easily accessible accounts in favor of higher-paying fixed-rate offerings.
According to the 34 savings providers that make up CACI’s most recent data, easily accessible balances fell from £801bn at the end of 2022 to £765bn at the end of April.
By contrast, fixed-term balances ended April at £239bn, up from £181bn at the end of last year.
The average one-year fixed-rate deal pays 5.1 percent, which is nearly double the average easy-access rate.
The best one-year fixed rate currently pays 6.15 percent, courtesy of Vanquis Bank.
There are currently 19 one-year fixed-rate savings offers that pay 6 percent or more. Check out the best fixed-rate savings deals here.
Derek Sprawling added: ‘Fortunately, we’ve seen a strong increase in savers moving their money around more recently, with many switching to fixed-rate Isas to protect their cash from taxes.
‘But, the amount still held in bad paying accounts dwarfs that exchange activity.
“With inflation staying stubbornly high, it’s important for savers to know rates and make sure their cash is working hard for them.”
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