Those who have money sitting in a savings account they have not changed in years are urged to look out for the best deals to make the most out of their money.
As costs continue to rise, any extra cash and interest earned could be vital for those on low incomes.
There are savings accounts now offering much higher interest rates compared to last year and a savings expert has highlighted that “now is the time to move your money” if it’s in a low-interest account.
Lucinda O’Brien, personal finance expert at Money.co.uk Savings, explained why people need to switch accounts to earn more interest.
In April 2022, the Bank of England’s base rate was 0.75 percent, with an average interest rate for savings accounts at 2.72 percent and average instant access rates at 1.35 percent.
Fast forward to last week, and the Bank of England upped the base rate to 4.5 percent and the average interest rate for a savings account was 3.31 percent, with the average for an instant access at 2.42 percent.
Ms O’Brien said: “This clearly shows that rates have increased (although maybe not as high as we would like to see, so there is no reason to leave your hard-earned money in a low-interest savings account.
“Plus, if you do your research, you can easily beat the average interest rates and find accounts offering rates that are considerably higher than last year.
“Chip is currently offering an instant access account at 3.71 percent and you can withdraw and add money whenever you wish. This means it’s a flexible way to earn some interest on your savings without having to commit to locking it away for a period of time.
“GB Bank via Raisin also has an easy access account at 3.70 percent, with no limit to withdrawals, but you are unable to withdraw less than £500 in a single transaction and the balance must not be below £1,000.”
Alternatively, if someone would prefer a cash ISA, Paragon Triple Access ISA is an easy-access account with tax-free benefits and an interest rate of 3.51 percent.
She emphasised the impact of moving from a savings account offering a mere one percent interest to one that’s nearly at four percent.
The savings expert gave an example with one-year fixed-rate bonds.
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In May 2022, the average interest rate for a fixed-rate bond was 1.32 percent, 12 months later the average interest rate was 4.2 percent.
She said: “Now, according to the FCA, up to a third (34 percent ) of UK adults had either no savings or less than £1,000 in a savings account, so for the purpose of this example let’s consider how much interest can earn on £1,000.
“If you saved £1,000 in a one-year fixed-rate bond with 1.32 percent interest then you would have earned £13.20 from May 2022 to May 2023.
“If you then move that £1,013.20 into a new one-year fixed-rate bond with 4.2 percent interest, by this time next year you’ll earn £42.55. That’s an astonishing 322 percent more than last year.
“So, take this opportunity to review your savings, explore the best savings accounts available and move your money if it is currently sitting in an account earning little to no interest.
“Alternatively, if you are at the start of your savings journey, you’ll find great interest rates on instant access accounts and this will act as a reward for your new saving habits.”
For more information, people can visit the Moneyfacts compare website.
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