Billions being lost in interest

Even though interest rates have soared over the last few years, it’s staggering to see that there is still over £253 billion sitting in current accounts and savings accounts that are earning nothing, according to the latest figures from the Bank of England. It has fallen a little bit, from over £270 billion this time last year, but it’s still a significant sum and as a result, UK savers are missing out. This is particularly concerning when you could earn as much as 5% if you were to switch to some of the best savings accounts on the market.

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It's a wake-up call for everyone to reassess their savings strategy. With high inflation eroding the value of money over the last couple of years in particular, allowing such a significant amount to languish in zero-interest accounts is like throwing money away. Savers could be earning substantial returns by simply moving their funds to more competitive accounts.

For instance, consider the impact of earning a 5% interest rate. On £253 billion, this equates to over £12.65 billion in potential interest earnings every year. This is money that could significantly bolster individual finances, support future plans, and provide a stronger financial safety net. 

And of course earning interest can help to mitigate or even obliterate the damaging effects of inflation. If you are earning less than inflation, then the purchasing power of your cash will not be keeping up with the rising cost of living.

For example, if you have £50,000 in an account earning nothing, with inflation at the current level of 2.3%, after five years, although it would appear that you still have £50,000 in your account, the real value after the effect of inflation would have reduced your spending power to the equivalent of £44,626. However, if you had that cash in an account earning 5%, not only would the total balance have increased to £63,814 after five years, including accrued interest, but more importantly the real value would have grown too – giving you spending power of £56,956, so more than keeping up with inflation.
 

For more information about how inflation may be eroding your savings, take a look at our inflation calculator:

The reluctance to switch accounts often stems from a combination of inertia and lack of awareness. Many are unaware of the competitive rates available, while others might find the process of switching accounts daunting. However, with the advent of online banking and websites such as Savings Champion, it's never been easier to find and switch to a better savings account.
Whilst it’s often the lesser-known cash savings providers that offer the top rates, another reason for the inertia can be ‘worry of the unknown’. But it’s because they are less known, these providers need to work harder to attract new customers which means they offer the most competitive rates. And as long as you check that your money will be protected by the Financial Services Compensation Scheme (FSCS), there is no need to be worried.

Now is the time to act. Review your current savings accounts and the amount you are leaving to languish in your current account - and explore the market for better options. 

The potential gains are too significant to ignore, and the process of switching is simpler than many might think. By making a proactive change, you can stop missing out on the interest your money deserves to earn.

The top rates are listed on the Savings Champion. If you do come across an account that is not listed, check that it isn’t too good to be true by visiting the provider’s website or contacting them directly. Unfortunately, there are scammers out there, but by taking a sensible approach, there is no reason to miss out on earning some meaningful returns.

Remember, every day that your savings sit in a zero-interest account is another day you're missing out on better returns. Take charge of your financial future and ensure your savings are working as hard as you do.

If you are concerned about how inflation may be affecting your savings and investments, why not get in touch and see if we can help. For all those with £100,000 or more in savings, pensions, or investments we are currently offering a free review worth £500. You can request a free non-committal initial consultation with a member of our team or give us a call on 033 323 9065 to get in touch.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

Savings Champion and their associated services are not regulated by the Financial Conduct Authority (FCA).

The Financial Conduct Authority (FCA) does not regulate cash flow planning,