Eight in ten savers missing out on bank interest

Eight in ten savers are missing out on the best savings rates by keeping their money in the wrong type of account, a report has found.

According to Savings Champion around eighty per cent of savings funds held in banks and building societies are now in so-called "easy access" accounts, which tend to pay the lowest rates.

The average interest rate of easy access accounts is just 0.47 per cent, it found, compared to "notice" accounts which pay up to four times as much. 

Unlike easy access accounts which give savers immediate access to their savings, notice accounts require savers to give several weeks or months' notice, meaning they should not be used for emergency savings.    

The best easy access account on the market is offered by Coventry Building Society paying 1.35 per cent, while the lowest paying is HSBC at 0.05 per cent. 

For example Secure Trust bank is offering a 180 day notice account which pays 1.77 per cent. 

On savings of £5,000 the difference between the lowest paying easy access account and the highest paying notice account equates a difference of around £90 in interest a year, calculations show. 

Despite years of low interest rates as a result of interventions by the Bank of England, notice accounts are paying their highest level of interest in more than two years, Savings Champion said.

In total Britons are missing out on £5 billion in extra interest by choosing the wrong savings accounts, the report estimated.

In previous years easy access funds accounted for around 60 per cent of all interest-bearing deposits, with the remainder in notice and fixed term accounts. But over the years, money has poured out of the latter and into easy access accounts, where £724 billion is now sitting.

Anna Bowes, co-founder of Savings Champion, said: "We all know that most people leave funds languishing with their high street provider, as they assume that moving it won’t earn much more interest.

"And as the high street providers don’t offer notice accounts, this could explain why many don’t know about or use these useful middle-ground accounts.

"But, with rates as low as 0.05 per cent on the high street, if savers knew they could increase the interest they earn by as much as 1.70 per cent - which equates to an extra £850 a year on a balance of £50,000 - and still have access to their funds within four months, surely it’s worth moving funds that aren’t needed immediately."