Credit crunch fails to spur savers into action

Savers are missing out on roughly £8bn every year in interest by leaving their hard-earned cash in accounts which pay interest rates well below the base rate, according to a new study by the Post Office.

At a time when inflation is at a four year high, food prices are higher than ever and credit harder to come by, the Post Office is urging savers whose cash is languishing in low rate accounts to find a home for their money where it will work as hard as possible for them.

The Post Office calculated that a saver with an average deposit of £5,000 sat in an account paying an interest of 2% could be missing out on up to £188 a year, compared to the interest that could be earned on the Post Office's Instant Saver which pays 5.75%. This rises to £440 after three years and more than £725 in five years.

In 2007, £26.4 billion worth of new saving deposits were made across the UK, but with many savers unaware of their interest rate billions of pounds of interest is being lost. Worryingly, three in ten (30 per cent) savers have no idea at all what rate their savings account currently pays.

When it comes to choosing a home for your savings, the interest rate should be one of the most important factors. However, the reality is that 39 per cent of savers have no idea whether their provider has altered its rate during the recent base rate changes.

When it comes to their savings people in the North East are the least aware with 37 per cent not knowing what interest rate their savings are earning. People in the East Midlands were the most aware with just 22 per cent not knowing what their interest rate was.

Richard Norman, director of savings at the Post Office, said: "It's time savers started to take care of their savings by choosing a home for them wisely - especially in the current economic downturn. There are hundreds of poor paying accounts, so people need to avoid them.

"If you don't know what interest you are currently earning, contact your provider. If it is paying a low rate and you want it to earn more then move it. Although it might be tough to put money away at the moment, it is more important than ever to make sure your existing savings work as hard as they can for you.

"Anybody who is looking to open an account needs to check out the interest they will earn, and how easy it will be to access their funds. Our Instant Saver account offers immediate access and includes a guarantee to never be more than 1% below the base rate."

Instant Saver is available at over 13,000 UK Post Office branches, by telephone and online. Withdrawals can be made over the counter at branches and via Link ATMs, offering unrivalled choice and convenience.

Unlike many other providers Post Office Instant Saver guarantees to pass on all base rate rises in full until January 2010 and also guarantees to remain within 1.0% of the Bank of England base rate for the life of the account. Savers can make six free withdrawals a year with a flat fee of just £1 for any future withdrawals.

To find out more about Instant Saver, log onto postoffice.co.uk.