UK households with savings accounts have been warned they could be losing out on £322 a year by failing to switch to better-paying accounts. Rachel Springall, finance expert at Moneyfactscompare.co.uk, has urged savers not to hesitate in chasing a better deal, emphasizing that those with closed accounts must act now to review their rates and escape what she calls the apathy trap, regardless of any changes to the Bank of England Base Rate.
The Impact of Closed Accounts
The Bank of England Base Rate last rose by 0.25% on August 3, 2023. While on-sale savings deals, including easy access accounts and easy access ISAs, took two months to catch up, closed easy access ISAs took four months to see any improvement. This delay means savers with closed accounts are missing out on significant interest earnings.
Ms Springall warned: "Apathy is dangerous when it comes to maximising interest returns, so savers need to feel inspired to shop around to take advantage of top rates." She noted that the best deals are typically offered by challenger banks and mutuals, which work hard to attract new business. Building societies are also consistent in offering fair value, in line with their principles to support members.
Financial Consequences
Savers who keep their nest egg in a closed account could be missing out more than they realise. A closed easy access account currently earns just 2.39%, resulting in a loss of £322 a year compared to investing £20,000 into an account earning 4%. This loss could be even greater if the cash is languishing in an old account paying a paltry rate.
Ms Springall advised: "Savers who have their nest egg in a closed account could see the real value of their cash diminish should inflation spike. However, they could hold out for longer with real returns by proactively switching to on-sale accounts offered by providers who breathe life into the savings market."
Recommendations
To avoid missing out, savers should review their accounts at least once every six months. By switching to on-sale accounts, they can take advantage of top rates and protect their savings from inflation. As Ms Springall concluded: "It's wise to review any accounts at least once every six months or so."
