A third of easy-access savings is in accounts earning 1% or less

A third of savings held in easy-to-access accounts still yield 1 percent or less interest, despite the highest levels since 2008.

The figures, based on savings from 34 leading providers, compiled by CACI, show that many savers are being defrauded at a time when savings interest rates are rising rapidly.

The basic interest rate of the Bank of England has been raised from 0.1 percent to 5 percent in eighteen months.

The average easy-access rate now pays 2.61 percent, according to Moneyfacts, while the best deal on the market currently pays 4.55 percent. Check out the best easily accessible deals here.

However, some of the larger banks in particular continue to offer savings accounts that pay 1 percent or less.

Lately, both the government and FCA have been trying to put pressure on the worst offenders to pay their depositors fairly.

Accounts with large balances also earn meager returns given the potential to earn meaningful returns now.

More than a quarter of all money held in easy access accounts (both Isa and non-Isa) earn 1 per cent or less and have balances of more than £10,000.

This equates to £205bn in the hands of CACI’s 34 leading providers, meaning a significant amount of significant interest is missing out.

In volume, it’s equivalent to nearly one in 10 easy-access — or six million — savings accounts.

A saver with £10,000 in an account earning 1 per cent a year would generate £100 in interest over the course of a year.

Someone who puts £10,000 in the market and leads a 4.55 per cent deal could earn £455 over the course of a year.

Derek Sprawling, savings director at Paragon Bank, said: ‘Given that rates have been rising on fixed and instant access accounts for over a year now, it is still surprising that more than three out of every £10 in an instant access account earn 1 per cent or less.

‘What is even more surprising is that those individuals with significant balances of £10,000 or more in their account are getting poor returns. I call on savers to scour the market for better paying bills.’

Why do savers let their money fester?

James Blower, founder of the wesbite Savings Guru, says many savers let their money languish in a low-paying account, often out of blissful ignorance or convenience.

Blower says, “I think some savers are blissfully oblivious and just assume they’ll benefit from rising interest rates.

“I think some don’t care because they think it’s not worth the effort—when they’re actually missing out on four times as much interest as they could earn.

“Some are deliberately just leaving it there and some are not aware that rates have risen as much as they have. There is a multitude of reasons.

“Many still stick with their checking account provider for convenience – and these are some of the worst offenders.”

As might be expected, his advice to those who continue to leave their money in this account is probably obvious. Switch. Even if it seems pointless to do so.

Blower adds: ‘Even a relatively modest amount of savings could add up to so much more – £5,000 in the highest paying easy access Isa gets £210 in interest and £278 in the highest paying.

“On regular non-Isa accounts it’s £277.50 and £307.50, so these aren’t insignificant amounts.”

The trend towards saving with a fixed interest rate

While many savers let their money languish in accounts that pay meager returns, some have shunned easily accessible accounts in exchange for higher paying, fixed-rate deals.

Based on the 34 savings providers included in CACI’s most recent data, easily accessible balances fell from £801bn at the end of 2022 to £765bn at the end of April.

Conversely, fixed-term assets ended at £239 billion in April, compared to £181 billion at the end of last year.

The average one-year fixed-rate deal pays 5.1 percent, which is nearly twice the average easy rate.

The best one-year fixed rate currently pays 6.15 percent, courtesy of Vanquis Bank.

There are currently 19 one-year fixed-rate savings contracts that yield 6 percent or more. Check out the best fixed rate savings deals here.

Derek Sprawling added: “Fortunately, we’ve seen a surge in the number of depositors transferring their money recently, with many switching to fixed-rate Isas to protect their money from tax.

‘But the amount that is still in poorly paid accounts dwarfs that switching activity.

“With inflation stubbornly high, it’s important that savers know about interest rates and make sure their money works hard for them.”