Savers have been warned they are missing out on billions of pounds with so-called zombie bank accounts accruing no interest
UK savers have been told they are missing out on a returns as they let their money languish in ‘zombie’ bank accounts without earning interest. With the Bank of England (BoE) slashing the base rate this Thursday, people are being urged to get savvy with their savings.
Bank stats reveal an eye-watering £280 billion is idling in interest-free savings accounts. In recent times, when the BoE boasted rates above 5 per cent, wise savers reaped substantial gains from their stashed deposits.
The base rate dipped from 4.5 per cent to 4.25 per cent, a move expected to trigger a drop in variable savings accounts’ interest rates too.
However, investment experts over at AJ Bell sound a clarion call for individuals to capitalise on the currently high-interest rates. They suggest securing your funds in high-yield savings accounts rather than allowing them to sit interest-free.
Laura Suter, AJ Bell’s personal finance expert, told savers: “If you want one figure to sum up the apathy of the UK’s savers, it’s the fact that £280 billion is sitting in accounts earning absolutely no interest, at a time when interest rates are north of 5% for some savings accounts.”
Bank of England figures up to the end of March have revealed a staggering amount of cash earning absolutely no interest, with the sum having swelled in recent years despite rising base rates and decent savings rates. The total of non-interest-bearing cash has shot up by £51 billion over the past year.
Laura added: “The nation is missing out on millions of pounds of potential returns on their money. Even if the £230 billion sitting in zero-paying accounts a year ago had earned a rather pedestrian 3% return on the cash in the past 12 months, it would have made the nation £6.9 billion richer.”
Inflation, although down from its peak, continues to chip away at the value of money, diminishing its purchasing power every year. Laura warns that leaving your cash in a current account or an outdated savings account is like “stuffing it under your mattress”.
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Maximising your savings
To dodge zero-return accounts, AJ Bell offers advice for savers looking to boost the yield on their stashed cash:
– Minimise the balance in current accounts.
– Hunt for top interest rates.
– Don’t overlook Cash ISAs.
– Explore gilts.
– Look into money market funds.
– Consider broader investment options.
Moneyfactscompare’s latest data indicates that some savings accounts are offering meagre interest rates as low as 0.49 per cent on minimum deposits of just £1. But certain banks are tempting customers with easy access and Cash ISAs boasting rates surpassing five per cent.