Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk, said:

“Millions of savers could be missing out on hundreds of pounds each year by leaving their money in older, underperforming cash ISAs instead of switching to the most competitive accounts on the market.

“While interest rates have risen significantly in recent years, many loyal ISA customers have been consistently penalised by holding their cash in ‘closed’ accounts that trail behind the most competitive accounts by over 2%, reflecting a wider trend where the most competitive rates are often reserved for new customers. Providers will often prioritise higher rates for new customers as a way to attract fresh deposits to help manage costs or fund future lending.

“Currently, someone with £20,000 in the average closed easy access ISA account is earning just £498 in a year, compared to £914 they could be earning in the top easy access cash ISA. The incentive to switch quickly becomes clear when faced with a £416 shortfall, an amount many savers can’t afford to miss out on, particularly amid ongoing financial pressures. However, when rates were closer to their peak, the gap cost loyal savers as much as £504.

“With the new tax-year now only days away, savers have a fresh opportunity to review their ISA and make sure their money is working as hard as possible. Transferring to a more competitive account can be a simple way to boost returns without affecting this year’s allowance and, most crucially, it protects the tax-free status of those savings. By contrast, withdrawing funds and redepositing them could result in losing those tax benefits. It’s important to check the details of each account carefully; some providers may offer lower rates on transferred-in balances or rely on introductory bonuses meaning the headline rate may not last. To make the most of their tax-free savings, investors should review underlying rates and conditions to avoid disappointment.”