Brits are being urged to check their savings pots as closed accounts risk losses from a “loyalty tax”, new analysis shows. Moneyfacts found that £20,000 left in a closed easy access savings account made £139 less in interest when compared with an active account, with an average difference of 0.22%.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said savers have endured years of unrewarded loyalty when they could easily have secured a rate of 4% with a top rate deal over the last three years. She added: “It shows the importance of shopping around for a better rate for flexible pots.”
The analysis came on the same day the Bank of England announces its latest interest rate. The base rate was held at 3.75% in September, but some experts expect it to rise to 4% on Thursday (November 5).
Typically, banks and building societies raise the rates on their variable savings accounts when base rate rises, meaning your money earns more. However, this is not always the case.
Moneyfacts‘ analysis found about half (43%) of savings accounts fail to pay more than base rate, with the biggest banks paying an average 1.16% on their flexible easy access accounts.
Ms Springall advised savers to review their old accounts as there is no guarantee base rate will be passed on.
She said: “Only if savers have a flexible pot that’s tethered to [base rate] will they see an uplift, for others, it could be time to switch and ditch their old account.”
Figures from the Bank of England show more than £306billion is languishing in current and savings accounts paying zero interest.
Pressure on Threadneedle Street to take action on rates has grown since official figures showed the rate of Consumer Prices Index inflation rose to 3.5% in September, its highest level in 11 months.
The conflict in the Middle East has helped push CPI further away from the Bank’s 2% target rate, with a surge in petrol and diesel prices a major influence.
Inflation is expected to be pushed higher this winter after Ofgem’s energy price cap rose by 3.6% for a typical household on October 1 and is forecast to jump by a further 22% in January.
Rate-setters will also consider other economic indicators, including the UK’s unemployment rate falling to its lowest level in over a year in the three months to August, to 4.7%.
Furthermore, the economy unexpectedly grew in August, by 0.1%, suggesting resilience in the UK despite pressure on consumer spending and wider volatility because of the Iran war.
