Experts say big banks are ‘taking too many savers for granted by paying them paltry returns’ on their savings

Savers in the UK are losing hundreds of pounds a year by sticking with big banks for their savings accounts, figures show.

Analysis from Moneyfactscompare.co.uk reveals that switching a typical £25,000 savings pot from a high street bank to a top-paying challenger account could earn an extra £777 in interest over 12 months.

The Bank of England recently held its base rate at 4 per cent. Analysts generally expect an interest rate cut in either December or February and because most easy-access and fixed-rate savings accounts roughly follow the base rate, any cuts could reduce the interest you earn.

With this in mind, experts say now is an ideal time to review your savings and lock in the best rates while they last.

Here, we examine how much savers could make by moving their money, why so many are missing out, and what the best rates currently are.

How much could you make?

A typical high street bank offers an average rate on easy-access accounts – where money can be withdrawn at any time – of just 1.39 per cent. This gives a 12-month return of £347.50 on a £25,000 deposit, according to the research. When adjusted for inflation, this represents a loss of £602.50 in real terms.

By contrast, the top rates available pay around 4.5 per cent, providing a 12-month return of £1,125, and a real return of £175 after inflation. Savers who make the switch could therefore earn an extra £777 by shopping around.

Adam French, head of news at moneyfactscompare.co.uk, said big banks are “taking too many savers for granted by paying them paltry returns” on their savings.

“The best way to fight back is to ditch your apathy,” Mr French said. “Even small differences in interest rates can make a big difference over time, especially when inflation is considered.

French added: “They might also benefit from using cash ISAs to protect their savings from tax, which could bolster their return further.”

Savers can put £20,000 into ISAs each year – in savings or investments – and these are shielded from tax. Otherwise, basic rate income tax payers pay 20 per cent income tax on interest over £1,000 and higher rate payers pay 40 per cent on over £500.

How much people are missing out on and why

Despite better rates being available, millions of UK savers are sticking with low-interest current accounts.

Research from Marcus by Goldman Sachs shows that 46 per cent of UK savers still hold money in current accounts – where rates are usually rock bottom -while 41 per cent admit they haven’t moved their savings in the past year and have no plans to do so.

Rob Basinger, head of product and marketing at Marcus by Goldman Sachs, said: “Too many people are missing out on valuable returns because they believe keeping money in a current account is the best way to ensure it’s available in an emergency.

Tips for boosting your savings

Having a range of different accounts, each with its own purpose, can help individuals make the most of their money, Basinger said. Here are the main types to consider:

Easy access accounts – Ideal if you might need to withdraw funds without notice.

Regular savings accounts – Require monthly deposits, with fixed or variable interest rates that can often be higher than other accounts.

Fixed rate savings accounts – Lock in an interest rate for a set period, but access is restricted.

Cash ISAs – Offer tax-free interest on savings, with annual deposit limits, making them a good way to grow a tax-free savings pot.

The best current rates

Two big-name easy-access accounts are currently paying 4.5 per cent.

Ulster Bank, part of NatWest, offers 4.5 per cent on balances from £5,000, including a one-year 2.75 per cent fixed bonus on top of its 1.75 per cent variable rate.

This effectively guarantees a minimum rate for a year. After that, the account “matures” and the rate drops, so savers will need to move their money.

Chase also pays 4.5 per cent to new customers, with a one-year 2 per cent fixed bonus on top of its 2.5 per cent variable rate. You first need to open its app-only current account to access the saver, though there is no hard credit check.

For those seeking a straightforward, no-frills option, Hodge Bank offers 4.21 per cent. The account is open to all, has no bonus, and no withdrawal limits.
Savers who are likely to pay tax on interest might consider a cash ISA.

Trading 212’s cash ISA offers a competitive 4.53 per cent, made up of a 3.85 per cent variable rate plus a one-year 0.68 per cent fixed bonus for new customers.