Savings warning: Britons 'seeing money shrink' as cash left in low interest accounts
Savers are "seeing their money shrink" due to low interest rate accounts
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Savers are "seeing their money shrink" due to leaving their money in bank accounts which are attached to low interest rates, new research claims.
Analysis of CACI data by Paragon Bank determined that 261,000 adult savings accounts with £10,000 or over in them were earning one per cent less in July 2024
Around 8,500 accounts which obtained balances of £100,000 or above were earning that amount.
This jumped to 42,700 savings accounts containing £50,000 or above.
Overall, these savers were found to be losing out on £258million in savings interest annually.
Based on CACI's data, some £8.6billion is kept in the quarter of a million products.
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Savings rates continue to be competitive GETTY As a result, this group of 250,000 savers have an average balance of £32,811.
Taking into account a one per cent interest rate, the average account should earn £328.11 in interest annually.
Collectively, this would translate to an overall savings interest boost worth £85.9million.
However, if that balance was moved to an account paying four per cent, the interest payment would jump to £1,312.42 over the year, or £343.8million overall annually.
Across the overall adult cash savings market, 2.3 million interest bearing savings accounts are earning one per cent or below, equating to £10.1billion.
Derek Sprawling, Paragon Bank's managing director of Savings, outlined the consequences of savers not taking action.
He explained: "Given the range of providers paying generous rates of interest available across the market, it’s remarkable there are still savers with large balances still accepting returns of one per cent or below.
"These savers are seeing their money shrink in real terms as their return remains below inflation and, collectively, are missing out on over £250million in interest.
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The Bank of England is likely to cut interest rates once again this year GETTY "The savings switch message can often get ignored by those with smaller balances, which can be understandable given the relatively small increase in returns, but those with sizeable deposits have a real and genuine incentive to move their money."
British savers have benefited from the Bank of England's decision to raise the base rate to a 16-year high in its fight against inflation.
Recently, the Bank has slashed interest rates from 5.25 per cent to five per cent in a win for borrowers but in a blow to high interest accounts.
With the consumer price index (CPI) rate falling to around the central bank's target of two per cent, further rate cuts are expected with savers being urged to grab competitive deals while they remain on the market.