Many bank customers are missing out on the extra payments
Millions of UK savers are leaving vast sums of money in low-paying accounts. Industry experts have urged people to switch to higher-paying alternatives with a better interest rate. If you have an account with big name providers such as Barclays, Santander and Lloyds Bank, it may pay to switch.
Many of the high street traditional banks have accounts with paltry rates which you could beat elsewhere. With billions of pounds currently parked in accounts earning an average of just 1.2%, now is a good time to check if you could get a better rate. Many big name banks have instant or easy access accounts paying around 1 per cent, while you can get rates with fixed rate accounts of more than 5 per cent.
Earn hundreds more
If you had £10,000 in savings and moved this from an account at 1 per cent to an account paying you 5 per cent, you would earn an extra £400 a year an interest. Many high street providers continue to pay meagre rates on their lowest-paying offerings:
- Barclays (Everyday Saver): 1 per cent
- Nationwide Building Society (Instant Access Saver): 1.1 per cent – 1.2 per cent
- Lloyds Bank (Standard Saver / Instant Cash ISA): 1 per cent
- Halifax (Instant Saver / Instant ISA Saver): 0.75% – 1 per cent
- Santander (Easy Access Saver / Easy Access ISA): 2 per cent
- HSBC (Flexible Saver): 1.05 per cent.
‘People are missing out’
Andrew Gall, head of Savings at the Building Societies Association, appeared on the BBC’s Money Box show to talk about the widespread issue with savers missing out on potential gains. He said: “People are missing out on interest that could be building up to help them achieve their savings goals.”
When pressed on why account holders fail to shop around for better deals, Gall pointed to simple human behaviour “inertia”. He told the programme: “They don’t have the time to act – they intend to, but never get round to it”
However, the interview also tackled why financial institutions—including smaller building societies that pay under 1 per cent—do not simply raise their rates across the board. Mr Gall explained the balancing act that providers have to work with.
‘They tend to have lower rates’
He said: “There’s lots of factors that go into setting the rate and providers have to be really alive and careful with managing their inflows to make sure that’s sustainable for the business overall and match with competition in the market and lending objectives. And there’s certain needs as well where people want accounts where they have access, where they tend to have lower rates.”
Locking cash away in fixed-term accounts generally yields stronger returns, while easy-access options often offer lower rates in return for being able to access your funds whenever you want. The expert also explained how account with other specific features can mean a lower rate.
He said: “Also there’s types of accounts such as affinity accounts where some of the interest goes to a good cause. There’s some of those rates where certain conditions are around withdrawals, for example, where if you don’t meet those, then you drop to a lower rate.”
