Did you know that savers in the UK have missed out on a combined total of £6.9billion in returns from their savings in 2023?
Recent Bank of England data has shown that on average UK adults held some £235bn in current accounts that do not pay any interest.
Consumer finance website Money Age reported that based on the average non-ISA instant access interest rate of 2.95%, savers could have earned the £6.9bn in interest if they had transferred their current account deposits into an instant access savings account.
If that was placed in an average one-year fixed bond with a rate of 4.65%, the interest would have been £10.9bn.
Of course, current accounts are used for many things, both personal and business and often as a ‘hub’ for money to move in and out on a regular basis – many of us do not choose them for their interest rates!
But as a vehicle for saving excess amounts, they are certainly not suitable and if you have money sitting ‘idly’ for any significant period of time, perhaps you should be considering a different option?
Last summer we reported in this column how £1.8 TRILLION was sat in cash savings accounts around the UK, which sounds respectable until you appreciate the value of that was battered by inflation, with people effectively losing money in real terms.
For example, cash ISAs are popular with many, but until very recently the rate of inflation outstripped the rate of interest. The best cash ISAs are currently offering between 4-5% interest, though most of those are fixed rate bonds, meaning you will not have instant access to your money.
Inflation unexpectedly increased to almost 4% in December, after a falling trend, but if that is a blip and it continues to fall, so will interest rates – in short, your savings rates will no longer be as attractive.
If you have significant savings essentially ‘wasting away’ in a cash ISA, or worse yet, doing you absolutely no good whatsoever in a standard current account, please do consider ways you can put that money to work to your benefit.
There are various options available to you, but it is best to seek professional advice, such as from an independent financial adviser (IFA) on what will work best for you.
In the longer term, something such as a Stocks and Shares ISA or Pension generally gives a better return albeit returns cannot be guaranteed and the value will fluctuate. You can decide the level of risk you prefer and in any case, a wide-ranging portfolio will spread that risk.
Of course, you want some flexibility in your finances and current accounts are an important part of that, but leaving larger sums of cash to ‘lie fallow’ is simply a waste, so please do give it some thought.
