People are missing out on potentially hundreds of pounds' worth of free money as they leave their cash sitting in accounts that pay no interest. Up until the current cost of living crisis, banks had been paying little-to-no interest on accounts as the Bank of England's rate remained low.
However, recent hikes in a bid to get a grip on rocketing inflation mean that, for the first time in years, high street banks are now paying a good level of interest on easy-to-access accounts. Now, analysis by a building society claims to have found that as much as £268billion of money is still sitting in accounts that pay zero interest.
Coventry Building Society said around a fifth (21%) of households' savings in flexible and easily accessible accounts is deposited in accounts where no interest is being paid. At a time of high inflation, the real value of money sitting in 0% accounts is being eroded sharply.
While interest-paying accounts may not match inflation, they may at least offset some of its impacts. The Society analysed Bank of England data to make the findings.
It said that, even with current pressures on households' finances, the latest statistics show growth in the total amount of household savings held in current accounts, easy access, fixed-rate bonds and cash Isas in November compared with the previous month, now standing at more than £1.73trillion.
Jeremy Cox, head of strategy at Coventry Building Society, said: "As we enter the new year, rates of around 3% are readily available in the savings market and we expect money going into zero-paying easy access accounts to lower as savers shift money into higher rate accounts to maximise their savings pots. Higher rates also mean a higher risk of exceeding personal savings allowances.
"The current allowance gives basic and higher rate taxpayers a tax-free allowance for their savings income of £1,000 and £500 respectively, unless their savings are protected by an Isa. Isas provide a tax efficient way of saving £20,000 a year and we think the popularity of these accounts will grow as many savers make use of their annual Isa allowances this year."
