Bank's 'wrong account' warning to savers who are losing £250m in interest

Savers are seeing their money shrink in real terms by not taking advantage of higher interest rates that are available

A bank has warned that thousands of savers are losing more than £250 million in interest by leaving their money in the 'wrong' account. Substantial stashes of cash are stuck in accounts offering only very low interest rates when much better deals are available.

More than 250,000 adult savings accounts holding £10,000 or more are losing over £250 million in interest despite the growth in savings rates over the past two years. Paragon Bank's analysis of CACI data showed that 261,000 interest-bearing adult accounts containing £10,000 or over were earning 1 per cent or less in July 2024. Over 8,500 accounts boasting balances of £100,000 or above were earning that figure, rising to 42,700 accounts containing £50,000 or above.

Collectively, these savers are missing out on £258 million in savings interest each year. By value, CACI data shows that £8.6 billion is held in the quarter of a million accounts, creating an average balance of £32,811. Based on 1 per cent interest, the average account could expect to earn £328.11 in interest over a year, or collectively £85.9 million.

READ MORE:

• DWP asks Universal Credit claimants to supply bank statements for benefit checks
• October DWP and HMRC money changes for PIP, Universal Credit, ESA and pensioners

If that balance was transferred to an account paying 4 per cent, the interest payment would increase to £1,312.42 over the year, or £343.8 million overall annually. Across the overall adult cash savings market, 2.3 million interest bearing savings accounts are earning 1 per cent or less, equating to £10.1 billion.

Derek Sprawling, Paragon Bank's managing director of savings, said: "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 1 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 £250 million in interest.

"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."

You can get all of today's essential breaking news on the BirminghamLive WhatsApp. Join our dedicated community to receive the latest updates. For more on navigating the cost of living crisis, sign up for our Money Saving Newsletter which is sent out daily with the top stories on benefits, pensions, finances, bills, and shopping discounts.