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

A third of savings held in easy-access accounts is still earning 1 per cent or less in interest despite rates reaching the highest levels since 2008.

The figures, based on savings balances from 34 leading providers as compiled by CACI, shows many savers are being ripped off at a time when savings rates have been rising rapidly.

The Bank of England’s base rate has risen from 0.1 per cent to 5 per cent in the space of 18 months. 

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

A third of savings held in easy-access accounts is earning 1 per cent or less in interest despite rates reaching the highest levels since 2008.

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

Recently both the government and FCA have been trying to put pressure on the worst culprits to pay their savers fairly.

Accounts with large balances are also earning paltry returns, given the potential to now make meaningful returns.

More than a quarter of all cash held in easy-access accounts (both Isa and non-Isa) is earning 1 per cent or less and has a balance of greater than £10,000. 

This equates to £205 billion held among CACI’s 34 leading providers, meaning there is a considerable sum of money missing out on significant rates of interest. 

By volume, it equates to nearly one in every 10 easy-access – or six million – savings accounts. 

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

Someone putting £10,000 in the market leading 4.55 per cent deal could expect to earn £455 over the course of a year.

Derek Sprawling, director of savings at Paragon Bank, said: ‘Given rates have been increasing across fixed and instant access accounts for over a year now, it’s still surprising that over three in every £10 in an instant access account earns 1 per cent or less. 

‘What’s even more surprising is those individuals with significant balances of £10,000 or more in their account earning poor rates of return. I would urge savers to scour the market for better-paying accounts.’

Why are savers leaving their cash festering?

James Blower, founder of the wesbite Savings Guru, says many savers leave their cash languishing in low paying account often out of blissful ignorance or convenience. 

Blower says: ‘I think some savers are blissfully unaware and just assume that, as rates are rising, they’re benefitting. 

‘I think some can’t be bothered because they don’t think it’s worth the hassle – when they’re actually missing out on four times the interest they could be earning. 

‘Some knowingly just leave it and some are unaware that rates have gone up quite as much as they have. There’s a multitude of reasons. 

‘Many still keep with their current account provider for convenience – and these are some of the worst offenders.’

As can be expected, his advice to those who continue to leave their cash in these account is probabaly obvious. Switch. Even if it seems pointless to do so.

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

‘On ordinary non-Isa accounts, it is £277.50 and £307.50 so these are not insignificant sums.’

The trend towards fixed rate savings 

While many savers are leaving their cash languishing in accounts paying paltry returns, some have been shunning easy-access accounts altgether in exchange for higher paying fixed rate deals.

Based on the 34 savings providers that make up CACI’s latest data, easy-access balances fell from £801billion at the end of 2022 to £765 billion at the end of April.

Conversely, fixed-term balances ended April at £239 billion, up from £181 billion at the end of last year. 

The average one-year fixed rate deal pays 5.1 per cent, which is almost twice as much as the average easy-access rate.

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

There are currently 19 one-year fixed rate savings deals that pay 6 per cent or more. Check out the best fixed rate savings deals here.

Derek Sprawling added: ‘Fortunately, we have seen a strong uptick in savers moving their money more recently, with many switching to fixed-rate Isas to protect their cash from tax. 

‘But, the amount still held in poor-paying accounts dwarfs that switching activity. 

‘With inflation remaining stubbornly high, it’s important that savers are rate savvy and make sure their cash is working hard for them.’

This post first appeared on Dailymail.co.uk