Four in five easy-access savers still keep their cash in accounts paying less than 0.1 per cent interest despite rates increasing at the fastest pace in a decade, new data has revealed.
Although the average saver could net £ 176 in a year by switching to the best-paying account, many are yet to take advantage of the chance to earn higher returns according to analysis of CACI figures by Paragon Bank.
Easy-access savings make up nearly two-thirds of all savings balances, with the average balance being £ 12,511.
But legacy savers, dubbed ‘insult accounts’ for their miniscule rates, leave those with money in them lagging far behind the better deals in the market.
Below par: Analysis of the latest CACI data showed that £ 418billion of savers’ money continues to languish in savings accounts paying less than 0.1%
Someone with £ 12,511 stashed away in an account paying 0.1 per cent or less could expect to earn a maximum of £ 12.51 in interest in a year.
In contrast, stashing that same amount into the best-paying 1.5 per cent easy-access deal, which is offered by Chase Bank to its current account customers, would earn £ 189 after one year – a difference of £ 176.49.
This is Money’s editor, Simon Lambert, recently described accounts paying less than 0.1 per cent interest as insult accounts.
‘These are the legacy savings accounts paying such a pitiful rate of interest that to do so is an insult,’ said Lambert. ‘It would be better to not get any interest at all.’
Based on CACI’s database, which captures savings data from more than 30 leading providers, £ 418 billion of savers’ money is in these accounts.
Major banks including HSBC, Lloyds Bank, NatWest and Barclays all offer easy-access rates of 0.1 per cent or less.
Derek Sprawling, Paragon Bank savings director, said: ‘It is remarkable that £ 400 billion of savers’ money is sitting in accounts paying up to 0.1 per cent and it demonstrates how the high street banks rely on consumer apathy.
‘In this inflationary environment, I would urge savers to make their money work as hard as possible for them and to seek better rates of return for their finances.
‘Unfortunately, for too many people convenience trumps rate, but that needs to change.’
Could rising rates spring savers into action?
Average fixed rates savings deals have seen their biggest monthly rise in over a decade in May, according to Moneyfacts.
The average one-year interest rate rose month-on-month to 1.24 per cent, up from just 0.44 per cent this time last year.
Meanwhile the average easy-access deal now pays 0.39 per cent, up from 0.16 per cent, a year ago.
The best easy-access deals have not been this high since before the pandemic, whilst the best fixed rate deals have not reached the heights they are today since Spring 2016.
The three best paying easy-access savings deals now all pay 1.3 per cent or more.
Al Rayan Bank is paying 1.31 per cent and Gatehouse Bank is paying 1.3 per cent, whilst Chase Bank is offering a market leading 1.5 per cent – though that deal is only open to its current account customers.
The best one-year fixed rate deals are offered by Al Rayan Bank and Secure Trust Bank paying 2.26 per cent respectively. This is closely followed by Investec paying 2.25 per cent.
The best two-year fixed deals are offered by Oxbury Bank and Secure Trust Bank, both paying 2.6 per cent.
All these banks are registered with the Financial Conduct Authority and signed up to the Financial Services Compensation Scheme, protecting up to £ 85,000 per person, or in the case of joint accounts, up to £ 170,000.
For those interested in seeing the top deals, This is Money’s best buy league tables are kept up to date on a daily basis.
|Type of account (min investment)||0% tax||20% tax||40% tax|
|Al Rayan Bank (£ 5,000 +)||2.26||1.77||1.33|
|Secure Trust (£ 1,000 +)||2.26||1.77||1.33|
|Investec (£ 5,000)||2.25||1.80||1.35|
|Oxbury Bank (£ 1,000 +)||2.60||2.08||1.56|
|Secure Trust (£ 1,000 +)||2.60||2.08||1.56|
|Al Rayan Bank (£ 5,000 +)||2.57||2.06||1.54|
Rachel Springall, finance expert at Moneyfacts said: ‘Savings rates are climbing at a promising pace but the upheavals within the sector are largely fueled by providers who are competing towards the top end of the market.
‘Those savers who are looking to secure a guaranteed return may be pleased to see competition in the fixed rate sector, but as rates improve, some savers may not be comfortable with locking their money away for longer than a year.
‘Those savers who are comparing their options will need to decide whether to fix or keep their money in a more flexible pot, but also consider their tax-free allowances and any difference in rate between Isas and alternative accounts that do not have a tax- free wrapper. ‘
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