Britons are warned they are throwing away more than £800 a year each because they let their savings languish.
As the Bank of England lower rates for the first time in years, savers are urged to secure the highest rates they can before providers follow suit.
Britons have an average of £8,510 in current accounts.
If they moved that to an easy access account without restrictions, or a cash ISA, we could make 5.2 per cent.
By switching to a 5.2 per cent interest rate account, savers could be £453 better off in a year.
Around 52 per cent of people haven’t switched savings accounts in at least a year, and 50 per cent have no plans to ever switch, according to data from Hargreaves Lansdowne.
Overall there’s £254.3 billion sitting in accounts earning no interest at all
GETTYSarah Coles, head of personal finance at Hargreaves Lansdown, said: “We’re throwing away more than £800 a year each – and as much as £1,800 - because we’re letting our savings languish.
"We feel more secure sitting on a cushion of cash in our current accounts, where in many cases it’s earning no interest. The average household has £8,510 languishing in current accounts, and while we need some of it for essential spending, there’s every chance we’re keeping way too much to hand. Managing our current accounts better could leave us hundreds of pounds better off a year.
"The more cash we have, the more likely we are to be squandering the opportunity to make more of it. Higher earners have more in their current account.
"They’re also likely to have higher outgoings, so will keep more in these accounts to meet day-to-day costs. However, they may not need all of it, so it’s worth working out exactly what you need, and moving the rest."
Overall, there’s £254.3billion sitting in accounts earning no interest at all. If people switched it into the leading easy access savings account, they could earn £13.54billion in interest.
"It’s an eye-watering sum to be throwing away at a time when money is so tight," Coles added.
However it’s not just money in current accounts that could be working much harder.
Hargreaves Lansdown found that the average household has £6,095 in cash ISAs. Moving from the average easy access cash ISA (3.35 per cent) to the best on the market (5.2 per cent) would leave them £117 better off.
Additionally, the average household has £13,850 in savings accounts. Most of this is in easy access accounts. If it was moved from the average easy access rate of 3.13 per cent to the best on the market (5.2 per cent), it would leave them £298 better off - that’s a total of £868.
The fifth of people on the highest incomes have £17,356 in current accounts, so saving could leave them £924 better off in a year. They have £12,621 in cash ISAs, so moving would gain them £243 and they have £32,263 in savings accounts, so they could be £694 better off. That’s a total of £1,861.
Mark Hicks, head of Active Savings, Hargreaves Lansdown: “We need to shop around for a better rate on savings and cash ISAs. It’s worth considering online banks and cash savings platforms, where rates tend to be better.
"Savings platforms have the added advantage that you can select a range of competitive savings accounts from different banks over different timescales, open them without rigmarole and manage them in one place."
Currently, Hargreaves Lansdowne has a cashback offer that makes the effective interest rates "even more rewarding".
New clients to the Active Savings can earn up to £150 cashback. Cashback payable to anyone that opens an Active Savings account before 26 September 2024, with £5,000 or more.
Clients will receive a cash payment into their Active Savings account based on the opening value of assets opened in the cashback window.
The effective rate (AER) if people deposit £10,000 and receive £20 cashback:
- Easy Access before cashback 4.67 per cent – after cashback 4.87 per cent
- 3-month fixed rate 4.85 per cent – after cashback 5.05 per cent
- 6-month fixed rate 4.85per cent – after cashback 5.05 per cent
- One-year fixed rate 4.95 per cent – after cashback 5.15 per cent
- Two-year fixed rate 4.66 per cent – after cashback 4.86 per cent
