Savers are being urged to review their accounts, as many high-street banks offer poor interest rates, leaving billions of pounds earning little to no returns.
Anna Bowes, savings expert at The Private Office, warned that keeping money in easy-access accounts with major banks could mean missing out on significantly better rates elsewhere.
Many people leave their savings with their current account provider, but these accounts often pay some of the lowest interest rates on the market.
Ms Bowes highlighted Lloyds Bankas as an example, where savers earn just 1.15% on balances up to £25,000, with the top tier of 1.6% only applying to balances over £100,000. She told Sky News: “This is far less than the [Bank of England] base rate – and even more importantly, it’s less than inflation. So your returns will not be keeping up with the rising cost of living.”
Meanwhile, the top easy-access interest rate on offer for regular savings accounts at the time of writing is 5%.
Some high street banks offer higher rates but often come with conditions. For example, Santander’s Edge Saver Account pays a 6% Annual Equivalent Rate (AER) on balances up to £4,000, but this includes a temporary 12-month bonus and requires a £3 monthly fee.
Barclays’ Rainy Day Saver offers 5.12% AER on balances up to £5,000, but access requires a £5 monthly fee.
Ms Bowes advised that switching current accounts just for a savings boost may not be worth it. However, if your account offers cashback or other perks, it’s worth checking if a linked savings account has competitive rates.
With the Bank of England expected to cut its base rate to 4.5% on Thursday, now is the time to act. Research from Yorkshire Building Society and CACI showed that nearly £400 billion is sitting in UK savings and current accounts earning just 1% or less.
For those looking for higher returns without restrictions, digital bank Chase offers an AER of 5% on balances up to £3 million.
Providers Chip, powered by Clearbank, and Atom Bank are both offering an AER of 4.85% on balances up to £1million and £100,000, respectively.
Fixed savings accounts are offering marginally lower rates. However, the top accounts are still largely outperforming average high street bank’s interest rates.
Vida Savings currently tops the table for one-year fixed accounts, which enable people to lock in the interest rate offered at the time of opening. However, these accounts come with more restrictions around withdrawals.
Savers can lock in a 4.77% AER for one year with Vida Savings on a minimum balance of £100. Withdrawals are not allowed until the account matures.
For savers with larger deposits, Close Brothers Savings is just behind with an AER of £10,000 and a minimum balance of £10,000. Withdrawals are not allowed from this account until it matures.
Click here to see a full list of top savings accounts on offer right now.
Ms Bowes warned: “It’s a sad truth that you generally will not be paid for loyalty by your high street bank. But it can be quick and easy to earn much more interest if you are prepared to use a lesser-known provider.”
