UK households with £20,000 in a closed easy-access savings account are being warned they could be missing out on £322 a year in interest. According to Moneyfactscompare.co.uk, the average rate on such accounts is just 2.39%, while the top easy-access accounts pay over 4%.
Average savings rate now 3.57%
Moneyfactscompare.co.uk has found that the average savings rate across all accounts now stands at 3.57%. However, many savers remain in older, closed accounts that pay significantly less. Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: "Savers blinded by loyalty or failing to check their easy access accounts regularly could be earning a paltry rate. Convenience comes at a cost, so savers who keep their pots with a high street bank, or even in a current account, are not making their money work as hard as it could."
Top rates vs. high street banks
The top savings rates on live easy-access accounts pay more than 4%, yet some of the biggest high street banks pay just 1%. A closed easy-access account will be earning a pitiful 2.39% on average, which results in a loss of £322 a year unless savers instead deposited £20,000 into an account earning 4.00%.
Martin Lewis advice on saving vs. investing
BBC and ITV star Martin Lewis also weighed in, advising savers to consider their options carefully. He said: "Saving is investing’s poorer cousin – should you be investing? The first place to put spare money is always to build up a cash emergency fund of three to six months' worth of bills. But for money you won’t use for 5+ years, saving isn’t usually the winner. It's worth considering putting some of the rest in a broad spread of investment (eg, a global tracker fund that mirrors the performance of a huge range of companies)."
Lewis added: "Got costly debt? It's usually best to use spare cash to clear it first, after all pay off a grand’s on a credit card at 25% APR rather than save at 5% and you’re £200 a year better off. Is overpaying your mortgage a better way to save? If your mortgage rate is the same or higher than you earn in savings, check our Mortgage Overpayment Calc to see if it may be worth you overpaying. If it looks likely, read Should I overpay my mortgage? for full pros & cons."
