Hundreds of thousands of savers are losing out on tens of thousands of pounds in ‘free’ cash by leaving money languishing in accounts paying nothing.
Analysis reveals more than £32 billion is sitting in 323,000 accounts with balances over £100,000 – all earning 0%. That means savers are missing out on as much as £25,000 in returns over five years.
A further six million accounts hold more than £10,000 each and are also paying nothing, according to research by savings provider Spring. The typical balance in these dead-weight accounts is £34,857.
In total, £316.5 billion – some 80% of all current account cash – is stuck in accounts offering 0% interest.
The findings come as inflation stayed stubbornly high at 3.8% in August, its highest for 19 months. Despite this, the Bank of England froze its rate at 4% on Thursday.
Rates had previously been driven as high as 5.25% between 2023 and summer 2024 to try and tame surging prices.
Experts warn that anyone with savings earning less than 3.8% is effectively losing money once inflation is taken into account.
Putting £100,000 into Birmingham Bank’s five-year fixed-rate bond at 4.53% would generate £25,418 in interest – a total of £125,418 – though a tax bill on the earnings could follow.
By contrast, the same sum in an average easy-access account paying 2.56% would earn just £2,592 a year. One-year fixed eals are currently averaging 3.98%, according to Moneyfacts.
Derek Sprawling, of Spring, said: “Money is being eroded in value and could be generating much better returns if moved to a savings account offering a rewarding rate of interest.”
Andrew Gall, head of savings and economics at the Building Societies Association, added: “Moving savings into accounts that pay a good rate of interest doesn’t require complex decisions or a great deal of time – but it could make a meaningful difference to people’s budgets over the course of a year.”
Back in 2023, then-chancellor Jeremy Hunt and the City watchdog, the Financial Conduct Authority (FCA), urged banks to improve their savings deals as the Bank Rate climbed.
Under Consumer Duty rules, providers are supposed to ‘nudge’ customers in poor-paying accounts to switch.
An FCA spokesman said: “Our work on cash savings encouraged a more competitive savings market. Despite the Bank Rate having fallen, in early September, there were more than 100 easy access products paying more than 4% and nearly 300 offering over 3%. People who don’t feel they’re getting a good deal should shop around and move their money.
“Under our Consumer Duty, firms should actively engage customers in low-interest savings accounts, helping them make informed choices.”
