Savers miss out on £1bn interest by not switching
SAVERS are missing out on more than £1 billion in interest by sticking with terrible easy-access deals paying as little as 0.01 pc.
The gap between the best and worst rates on easy- access accounts is widening, with new banks offering up to 1.25 pc.
Experts are optimistic that rates will creep up further, which means savers are at risk of missing out on even more interest.
Last week Mark Carney, governor of the Bank of England, said interest rates could go up if wages increase and businesses start investing more. His comments came as a surprise to many as earlier in the month he had insisted that an increase was not on the cards.
There is no guarantee big banks will raise their rates for existing savers to match any rise in base rate. But smaller banks and building societies, who are keen to attract your money, are much more likely to mirror any increase.
While they have been edging up rates, many poor-paying accounts from big players have got even worse.
Figures from data analysts Moneyfacts show the number of easy-access accounts paying less than 0.25 pc has shot up to 34 pc from a quarter a year ago.
The knock-on effect is that the average rate on the £662 billion in easy-access savings accounts is now just 0.4 pc — down from 0.7 pc this time last year, and 0.79 pc three years ago.
Despite this, a study by the Financial Conduct Authority found that four in five easyaccess accounts have not been switched in the past three years.
Some £160 billion is stuck in accounts earning 0.5 pc or less.
By switching to a top deal at 1.25 pc, these savers could boost the interest earned on this sum by at least £1.2 billion. New banks including Ford Money, Ken t Reliance, Shawbrook Bank, and Leeds BS all pay 1 pc or more.
Among the worst accounts are NatWest Instant Saver and RBS Instant Saver at 0.01 pc.
Halifax, Santander, Lloyds and HSBC reward their loyal savers with as little as 0.05 pc.
Savers could earn an extra £124 interest a year on each £10,000 by switching from an account at 0.01 pc to one at 1.25 pc.
Opening a new account is less onerous than it used to be. You need to prove who you are and where you live due to money laundering rules. But most providers will now check you out electronically via the electoral roll and your current account. Banks and building societies often ask for different information. Ulster Bank, which launched its online eSavings account at 1.25 pc last month, requires your debit card number and passport details. Others will ask for your bank’s current account sort code. If you don’t pass the electronic checks, you have to do things the old- fashioned way and send paper proof, such as a copy of your driving licence and utility bills or bank statements. The documents you have to submit may differ between providers. Anna Bowes, from consumer website Savings Champion, which opens accounts on behalf of its clients switching to better deals, says: ‘The lack of standardisation in the process of opening an account is frustrating. Savers often need to jump through several hoops. But it is worth it for the extra interest you can earn.’