Millions of Brits could be £1,000 a year out of pocket as £400billion languishes in low interest accounts
External Communications Manager
Yorkshire Building Society
Nearly £400billion[i] is sitting in UK current and savings accounts earning returns of 1% or less
There are 13m current accounts[ii] held in the UK with a balance of over £5,001, with the average held in those accounts standing at £24,500
Over half (55%) of people admitted they haven’t changed where they save money in the last twelve months – leading to millions potentially missing out on over £1,000[iii] extra income.
Millions of Brits are potentially missing out on nearly £1,000 extra income a year because their savings are in low- or no-interest paying current accounts, analysis from Yorkshire Building Society and CACI suggests.
There are nearly 13 million current accounts held in the UK with balances above £5001, and of those people who hold at least £5,001 in their current account, the average balance held is £24,500.
Almost £400bn is being held in current and savings accounts earning 1% interest or less, but peoples lack of understanding of the impact of their savings habits means millions are losing out on potentially thousands of pounds in interest.
Research[iv] also complete by Yorkshire Building Society suggests that over half (55%) of savers haven’t compared the interest paid on their accounts in the last year, and over a third (36%) hold most of their savings in a current account, which offers little or no interest.
Almost half (49%) of people surveyed said they had dipped into their savings in the last 12 months, and being able to access money in an emergency (like for a boiler breaking down or car repairs) is one of the reasons people don’t switch to higher-paying savings accounts. The average amount that people felt they needed to be able to access right away was £4,000.
Meanwhile, half (50%) of people surveyed said interest rates are the key driver for choosing a new savings provider, yet almost a quarter (22%) of people said they didn’t think it’s worth moving their money. One in five (19%) said they couldn’t be bothered with the hassle of moving their money and one in ten (13%) said they have never shopped around for a savings provider. Over half (53%) of people believe they are happy with their current provider.
Chris Irwin, director of savings at Yorkshire Building Society, said: “Despite savings interest rates getting a lot of attention over the last year, following the significant increases in the Bank Rate, it’s surprising that there are still large pockets of people who are significantly missing out on savings interest - shopping around can now make a substantial difference to the returns available.
"Keeping large amounts of funds in low paying current accounts has become a costly mistake for millions. It’s understandable to want to have money accessible for emergencies or even topping up everyday expenses, but with so many instant access savings accounts currently available in the market paying a much higher return, there has never been a better time to review the home of your savings.
“Reviewing finances and savings can sometimes be an afterthought, with other things in life taking priority, however the start of a new year provides the perfect opportunity to take a close look at your finances and increase awareness of your situation and from there look at how you could make small changes which add up to much bigger returns.
“It doesn’t matter how you choose to go about it, but making just one positive change to your finances, could make a big difference in the long-term.”
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk said: “The uplift in savings rates seen over the past year is worth celebrating, but it is worrying to see some consumers are missing out on better returns by not switching.
“Loyalty does not always pay on savings accounts and the convenience of using a current account is costing consumers in interest they could earn elsewhere, as many bank accounts pay little or no interest.
“It is vital consumers shake any apathy by comparing the latest savings rates and moving their money to grab a better deal. The beginning of a new year is a great time to start saving if someone does not have a nest egg to fall back on.”
Yorkshire Building Society, who commissioned the research through Opinium, hopes people will use the start of the year as an opportunity to face their finances, take steps to review their money situation and increase their potential income.
[i] £380.9bn in rest of market Current Accounts paying 0.00% to 1.00% and Instant Access non-ISA Savings Accounts paying 0.01% to 1.00%. Source: CACI’s Current Account & Savings Database (CSDB), Rest of Market Stock at Sept 2023.
[iii]Avg balance in a current account that has more than £5,001 is £24,501. £24,501 x 0.05% the Rest of Market Current Account avg interest rate for accounts with more than £5,001= £12 earned in interest. £24,501 x 4.80% Yorkshire Building Society Internet Saver Plus Issue 14 interest rate = £1,176 earned in interest. Equating to £1,163 per annum difference. Source: CACI’s Current Account Database, Rest of Market Stock at Sept 2023.
[iv] Research conducted by Opinium Research completed 24-27 October 2023 with 2000 National Rep UK Adults