How savers are missing out with billions in savings earning minimal interest
British savers hold £380.9 billion in low-interest accounts, missing out on higher returns.
An astonishing £380.9 billion is currently sitting in low-interest bank accounts, earning minimal returns for savers.
This situation has sparked a call for individuals to be more diligent in seeking better financial options.
According to a joint study by Yorkshire Building Society and CACI, a significant portion of this sum is held in current accounts and instant access non-ISA savings accounts, which offer interest rates ranging from a negligible 0.01% to just 1%.
Surprisingly, almost 13 million UK current accounts hold balances over £5,001, yet many savers are not taking advantage of higher interest rates available elsewhere.
Despite the availability of more lucrative options, a recent survey conducted by Opinium for Yorkshire Building Society found that 55% of savers haven’t compared rates in the last year.
Additionally, the same study revealed that nearly a quarter of savers have never switched accounts or opened new ones to capitalise on better rates, even though 2023 has seen record rates.
The average easy-access savings account rate was noted at 3.16% on Thursday, with one-year fixed savings deals averaging at 4.75%, as reported by Moneyfacts. This disparity in rates highlights a significant opportunity loss for those keeping their money in low-interest accounts.
Financial experts have observed a concerning trend: 49% of savers have dipped into their savings in the past year. On average, people feel the need to have immediate access to around £4,000.
This need for liquidity, however, doesn’t justify the widespread neglect of higher-yielding savings options. Only 53% of savers express satisfaction with their current savings provider.
Everyone needs some cash in their portfolio, and the general consensus is that most should keep the equivalent of three to six months’ worth of expenses in easily accessible accounts.
However, with inflation eating into your cash and the range of much better savings and investment opportunities currently available, people really ought to be exploring these options to maximise the earning potential of their savings. As well as fixed rate savings accounts, Cash ISAs and, for the longer-term, Stocks and Shares ISAs should be considered for surplus monies over and above the three to six months cash buffer.
If you are one of the many people holding a hefty amount of cash in your current account, it might be worth reading the article written a while back by Aaron Pitt, one of our Chartered Financial Planners.
Asking the question ‘how much cash is too much cash,’ he points out that there is no ‘one size fits all’ cash balance – we are all different – but outlines a few questions to ask yourself to work out a sensible amount. He then outlines a pragmatic alternative investment strategy to adopt with your cash.
This latest research certainly underscores the importance of regularly reviewing and potentially switching monies from your current account and low-paying savings accounts to optimise financial gains. Creating a structured long-term plan with a Financial Planner could be a great way to help you on this journey.
Contact Kellands today, to find out how we can help.