Savers pay the price for sticking with low-paying accounts

Around 11 in every 12 easy access savers have not changed their main account in the past year despite interest rates paid plunging to all-time lows, according to new findings from Consumer Intelligence.

Their research shows that only 8.5% of savers have held their easy access account for less than a year while 50% have had the same main easy access savings account for five years or more. At a time that the highest paying easy access accounts are typically either newly launched or include a 12 month introductory bonus, this suggests that the vast majority (91.5%) of easy access savers are missing out on the best returns.

The Bank of England’s announcement of an expanded Funding for Lending Scheme is expected to keep rates low for the foreseeable future. The scheme has already hit hard since its launch last summer and there is also no sign of any impending increase in the Bank of England base rate to ease the plight of savers.

Average easy access account rates are currently around 0.76% compared with 1.09% when the scheme started while the average paid by the top five accounts has fallen from 3.08% to around 1.7%.

Consumer Intelligence’s research shows around two-thirds of savers (65%) regard an instant access account as their main savings account and that 74% of them claim to review the rate at least once a year with 36% checking the rate every month.

David Black of Consumer Intelligence said: “The top-paying easy access accounts are typically newly launched or have one year introductory bonuses so anyone who has had the same easy access account for more than a year is going to be losing out.

“The rates paid on all savings are generally poor thanks to the continually low base rate and the Funding for Lending Scheme, so it does make sense to regularly review your savings and to move them to better paying accounts.

“Many of the long-standing accounts are paying 0.5% before tax and some even go as low as 0.01% which is practically pointless. Everyone should review and switch on a regular basis to secure the best possible returns. People often do it for insurance or utilities, so why not for savings?

“You should also ensure that you use your annual ISA allowance, although depending upon your attitude to risk and your investment time frame there’s a choice between cash and equity ISAs.”

Low rates are hitting savers in general, the research shows. Around 51% of people say they are saving less into all bank and building society savings accounts with 37% simply saving less and 14% putting spare cash into other methods of saving such as shares, unit trusts, OEICs, gilts and even collectables.

The study also found around one in five savers (19%) says it is difficult to find out what the rate is on their account.