Savers miss out on £12 billion in lost interest

Savers are urged to move their pots as billions of pounds in interest is lost due to zero interest accounts, according to Moneyfactscompare.co.uk analysis.

• The Bank of England estimated that around £300bn is sitting in UK current and savings accounts earning zero interest. If that money was instead earning a rate of 4%, it would give UK savers £12bn a year in interest. The money earning this rate, would also provide a real return, beating inflation at 3.1%.
• Convenience or loyalty comes at a cost for savers. The biggest banks pay an average rate of just 1.16% on their flexible easy access accounts*.
• Around half of UK savings accounts (45%) fail to pay more than the Bank of England Base Rate (BBR) of 3.75%.
• If BBR was to increase by 0.25% five times between now and the end of July 2027, it would rise by 1.25%, up from 3.75% to 5.00%. However, savers might not feel the full benefit on variable rate accounts that are not directly tied to BBR moves.
• The Moneyfacts Average New Savings Rate is now 3.67%, its highest point since February 2025 at 3.69%. 

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:

"Billions of pounds are being lost in savings interest, making it essential for consumers to take a step back and see how they can make their money work harder. Amid a cost of living crisis, every pound counts. It only takes a few minutes to set aside a bit of disposable income into a dedicated savings account, so by paying themselves first, consumers can make their money work harder by avoiding zero interest earning accounts. UK Savings Week is just around the corner, and it’s a fantastic campaign to increase awareness and help consumers improve their savings habits. Saving little and often is the key to building a healthy nest egg, but an even bigger difference can be made by putting spare payday cash into an inflation-busting savings account. Otherwise, busy lives and complacency set in, making it a little too easy to just leave cash sitting in a current account that pays no interest. 

"Easy access accounts are a firm favourite for savers due to their flexibility, but unfortunately not every saver will make time to open one, or if they do, they might just use one with their main bank for convenience. This oversight, or perhaps loyalty, comes at a cost; while the big banks pay interest, it pales in comparison to deals available from many building societies and challenger banks. Indeed, the most flexible accounts from the big banks* pay an average rate of just 1.16%. Ideally, savers need to aim for a return of 4% on a fully flexible easy access account that allows unlimited withdrawals to move cash to and from a current account as and when it’s needed.

"Savers also are under threat from having their savings interest taxed, as more people are being hit by fiscal drag, those becoming a higher-rate taxpayer at 40% will see their Personal Savings Allowance (PSA) halved. In the 10 years since the PSA was launched, it has never been changed, leaving many exposed to paying tax. Basic-rate taxpayers get £1,000 interest earned allowance, but this drops to £500 for higher-rate taxpayers. This is why cash ISAs will continue to be a huge help for savers trying to shield their hard-earned cash from tax, yet they are going to get more complex in 2027, and an additional 2% tax on savings interest outside of ISAs is being introduced. In light of the current situation for savers and upcoming changes, seeking advice is wise to take full advantage of any eligible allowances." 

*Big bank easy access selection: Barclays Bank, Everyday Saver, 1.00%. HSBC, Flexible Saver, 1.04%. Lloyds Bank, Easy Saver, 0.75%. NatWest, Flexible Saver, 1.00%. Santander Easy Access Saver, 2.00%.