Brits with savings accounts could be losing out around £370 per year due to a “loyalty penalty” as inflation remains steady, an expert has warned. On Wednesday (June 17) it was announced that the Consumer Price Index (CPI) held at 2.8% during May, in a boost for the Chancellor Rachel Reeves, while the Moneyfacts Average Savings Rate is at 3.57%, well above inflation.
MoneyFacts, says there are currently around 1,825 savings accounts that beat inflation (213 easy access, 179 notice accounts, 183 variable rate ISAs, 403 fixed rate ISAs and 847 fixed rate bonds). These accounts allow savers to get actual real-terms returns, as the value of them isn’t being diminished by price rises. However, if you haven’t shopped around and remain on one of the many accounts lagging behind inflation, you may be losing out unnecessarily.
Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk, said it’s important to shop around for the best deal because you could lose out on £373 per year if you don’t.
“As prices rise and economic uncertainty persists, easy access accounts are playing a crucial role for households trying to keep emergency cash within reach,” she told Newspage.
“However, major high street banks are lagging, with their most flexible accounts offering just 1.16% collectively, leaving savers with little protection against rising prices.
“By contrast, some challenger banks are offering market-leading easy access rates of up to 4.89%.” Ms Eastell said savers with £10,000 in a big bank easy access account “will earn just £116 a year, compared to the £489 they could earn just by switching to the best account”.
She referred to the £373 difference as a “loyalty penalty”. She says once savers are aware of this the “real-term benefit is difficult to ignore and they will be better off once they make the switch”.
“It’s difficult to stay put when over 200 easy access accounts pay inflation-busting rates. Savers who move away from low-paying high street banks can grow the real value of their cash and stop emergency funds being eaten away by inflation.”
Riz Malik, Independent Financial Adviser at Southend-on-Sea-based R3 Wealth, also called on savers to look around for the best rates.
“Don’t assume your bank’s current account is going to give you market-leading rates on your savings,” he told the news agency.
“It’s understandable that opening accounts is tiresome but there are platforms that allow you to switch between savings accounts with relative ease. It’s your money and it’s up to you that it is working as hard as possible.”
