'Blinded' savers warned of £322-a-year loss

'Blinded' savers warned of £322-a-year loss Millions of savers could be missing out on hundreds of pounds a year Millions of savers are being cautioned they could be losing hundreds of pounds annually. A typical saver with £20,000 in a closed easy-access account is receiving an average rate of merely 2.39% – potentially forfeiting £322 a year compared with transferring the funds into an account offering 4%. The research from Moneyfactscompare.co.uk revealed this despite savings rates remaining near their highest levels for over a year, with the average savings rate now at 3.57%. Experts suggest many customers are being "blinded by loyalty" and neglecting to review accounts opened years ago, enabling banks and building societies to pay them considerably less than what's available elsewhere. The alert is especially important as inflation stands at 2.8%, meaning numerous savings accounts are struggling to match rising prices and are effectively diminishing the real value of customers' money. Moneyfacts analysis discovered that four out of five easy-access accounts currently offer less than the Bank of England's 3.75% base rate. Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: "Savers blinded by loyalty or failing to check their easy access accounts regularly could be earning a paltry rate. Convenience comes at a cost, so savers who keep their pots with a high street bank, or even in a current account, are not making their money work as hard as it could. "The top savings rates on live easy access accounts pay more than 4%, yet some of the biggest high street banks pay just 1%. A closed easy access account will be earning a pitiful 2.39% on average, which results in a loss of £322 a year unless savers instead deposited £20,000 into an account earning 4.00%." The research further indicates that customers stuck in older, closed accounts are slower to gain when interest rates increase. When the Bank of England last raised rates by 0.25 percentage points in August 2023, it took approximately two months for average rates on new easy-access accounts to reflect the rise. In comparison, savers in closed accounts had to wait three months, while closed cash ISA holders waited four months. Moneyfacts stated that many savers have grown complacent after years of low returns, but suggested that reviewing accounts every six months could yield significant benefits. The analysis revealed that fixed-rate deals have grown increasingly appealing in recent months. The average one-year fixed-rate bond has climbed from 3.79% in March to 4.24%, whereas average easy-access rates have risen only slightly from 2.42% to 2.53%. Ms Springall advised those holding substantial cash balances to consider whether securing money for a fixed term could deliver better returns. She also cautioned that more savers could find themselves facing tax bills on interest as frozen tax thresholds pull growing numbers into higher-rate tax bands. Higher-rate taxpayers can only earn £500 in savings interest before being taxed, compared with £1,000 for basic-rate taxpayers. Simultaneously, she pointed out the increasing popularity of cash ISAs, which protect interest from taxation. Data from Moneyfacts shows that £12bn was deposited into ISAs in April alone, representing one of the largest monthly inflows since records began. Savers also face a deadline to maximise current cash ISA rules. From April 2027, the annual cash ISA allowance for those under 65 is set to be reduced from £20,000 to £12,000 as ministers attempt to encourage more individuals to invest through stocks and shares ISAs.