As much as £12 billion a year could be lost by households
Savers are being urged to take a fresh look at where they keep their cash, amid warnings that billions of pounds in interest is being missed because money is left sitting in accounts paying next to nothing. Analysis from Moneyfactscompare.co.uk suggests households could be losing up to £12 billion a year because around £300 billion is held in UK current and savings accounts earning 0% interest.
In simple terms, someone with £10,000 parked in a zero-interest account could be forgoing roughly £400 a year by moving it to a 4% deal. The gap grows quickly as balances rise. A saver with £20,000 could be missing out on about £800 a year, while £50,000 could generate an extra £2,000 if switched from 0% to 4%.
The warning comes as experts say many people stick with their main bank out of habit and convenience, even though the returns can be far lower than elsewhere. New figures also suggest plenty of accounts still fail to match the Bank of England base rate, meaning some savers are effectively seeing their money stand still.
Banks are cashing in
BBC Money Box presenter and financial journalist Paul Lewis highlighted the issue in a post on X, arguing that banks benefit when customers don’t move their savings. He said banks do not simply leave deposit money untouched, but can place funds with the Bank of England in reserve accounts and earn interest linked to the Bank Rate.
He wrote: “Banks have £915billion of our money in savings accounts paying average 1.64% and £305bn in accounts paying 0% – average 1.23%. They can deposit that with BoE which pays Bank Rate 3.75%. Over last 12 months banks made £28.5bn profit on our money!”
You don’t always have to lock cash away
Moneyfacts data suggests savers don’t necessarily need to tie up their money to get a better return. The average easy-access savings rate is currently 2.54%, but some easy-access deals are paying around 4% while still allowing withdrawals.
However, the biggest banks’ easy-access accounts pay much less on average. Moneyfacts says the major banks pay an average of 1.16% on flexible easy-access savings, which would mean £10,000 generates around £116 a year in interest – compared with roughly £400 at 4%. Even where interest is being paid, that gap can mean a saver is losing out by about £284 a year for every £10,000 if they don’t shop around.
Moneyfacts also says around 45% of savings accounts pay less than the Bank of England’s 3.75% base rate. The average rate across new savings products has climbed to 3.67%, the highest level since February 2025 (3.69%).
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “Billions of pounds are being lost in savings interest, making it essential for consumers to take a step back and see how they can make their money work harder. “Amid a cost of living crisis, every pound counts.”
She said busy routines can make it easy for people to do nothing – even when better deals are available. Ms Springall said: “Busy lives and complacency set in, making it a little too easy to just leave cash sitting in a current account that pays no interest.”
While easy-access accounts remain popular because they offer flexibility, she warned that loyalty can come with a cost. “The most flexible accounts from the big banks pay an average rate of just 1.16 per cent,” she said.
“Ideally, savers need to aim for a return of 4 per cent on a fully flexible easy-access account that allows unlimited withdrawals to move cash to and from a current account as and when it’s needed.”
Savings rates have risen sharply since 2021
The backdrop to this is a very different savings market compared with the ultra-low rate period. In September 2021, the average easy-access rate was just 0.17%. It has since increased to 2.54%.
Fixed-rate products are also higher on average, with Moneyfacts putting the average one-year fixed bond at 4.39% and the average five-year fixed bond at 4.49%. Cash ISAs are also offering stronger returns, with the average easy-access Cash ISA at 2.76% and the average one-year fixed Cash ISA at 4.35%.
Tax sting for savers
Another complication is tax. The Personal Savings Allowance has not changed since it was introduced, and frozen income tax thresholds mean more people risk paying tax on interest as wages and savings returns rise.
Basic-rate taxpayers can earn up to £1,000 in savings interest before tax is due. Higher-rate taxpayers can earn £500 before tax applies. For people likely to exceed those limits, tax-free Cash ISAs can be particularly useful.
Ms Springall said: “Cash Isas will continue to be a huge help for savers trying to shield their hard-earned cash from tax.” She also said changes expected in 2027 could make the landscape more complex.
For larger balances, the sums involved can be substantial. Someone with £100,000 earning 0% would get nothing, but at 4% could earn about £4,000 a year before tax. And even moving from the big-bank easy-access average of 1.16% to 4% would lift annual interest from around £1,160 to £4,000 – an increase of £2,840.
