Billions of pounds worth of savings is sitting in accounts earning less than 1.5 per cent interest, This is Money can reveal.
Almost £270billion of savings is currently languishing in more than 47million low-interest savings account, according to CACI data analysed by Newcastle Building Society.
The average balance held in these accounts earning a pittance is £547.46.
Someone with that balance in an account paying 1.5 per cent would earn £8 interest in a year, compared to almost £25 if they opened today’s top-paying easy-access account at 4.5 per cent.
Newcastle Building Society’s analysis of CACI data underlines the scale and reach of low-return savings accounts across the country, and comes with a warning about the cost of letting your hard-earned money languish.
Low-interest accounts make up almost half of all UK savings accounts and hold over one fifth of the country’s total savings balances, leaving billions of pounds exposed to lost interest.
Slow growth: Almost £270billion of savings is sitting in accounts paying less than 1.5% interest
Ben Smith, head of commercial and product development at Newcastle Building Society, says: ‘Hard-working people across the UK are failing to make their savings work hard for them, missing out on billions of pounds of additional interest.
‘The real impact of savings inertia means it takes people longer to meet their savings goals – whether buying a first home, saving for a big purchase, building an emergency fund, or planning a dream holiday.’
With inflation now at 3.8 per cent, savers who keep money in a savings account with a lesser rate are losing money in real terms.
If the average £547.46 balance sitting in a low-interest savings account were moved to the best easy-access account, which pays a rate of 4.4 per cent, they would have £572.04 if it were left in the account for 12 months earnning £24.58 in interest.
> Find the best rates using This is Money’s best-buy savings tables
If it were left in an account paying interest of 1.5 per cent, they would earn just £8.27 in interest by the time 12 months had passed.
John McCormack, a member of Newcastle Building Society based in Ponteland, Northumberland, switched his account to the mutual for a better rate.
He said: ‘The reason I changed savings accounts was because of the poor rate of interest we received from the banks. I didn’t feel as though we were getting a good deal.
‘It’s reassuring to know that our savings are in a place that offers us a more competitive rate of interest.’
There are better rates available to those who with to lock away their money in a fixed-rate savings account, though they need to be certain they won’t need the cash in that time as accessing it will incur a penalty.
Savings app Marcus backed by Goldman-Sachs has a one-year fixed rate bond paying 4.55 per cent interest.
A saver putting £547.46 in this account would grow their money to £ 572.90 by the end of the 12-month term.
Newcastle Building Society pointed to the ongoing tide of bank branch closures in leaving customers with fewer trusted ways to move their money, and reducing choice for those who prefer to manage their money in person.
Smith added: ‘Branches remain a vital part of how many people want to manage their money, giving them access to face-to-face guidance and advice, clear explanations and trusted reassurance.’
The mutual has doubled down on its commitment to face-to-face access to financial services as a result.
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