After a series of rate rises, many savers expected to see better returns on their savings, but the reality is quite different. According to research from Shawbrook, a specialist lending bank, nearly two in five savers are currently being paid rates lower than 2.5%.
Low-paying current accounts and a lack of switching mean that a significant number of consumers are missing out on potentially hundreds of pounds.
Some might be nervous about switching their savings, and others might just not have got around to it yet. To help, Adam Thrower, head of savings at Shawbrook has shared his top tips of what to look for when switching accounts.
- Savers often miss out on better returns due to low-paying current accounts and reluctance to switch.
- Top tips for maximizing returns include checking current savings rates, ensuring FSCS protection, and not limiting options to high street banks.
- Consider tax implications and choose the right account based on individual needs and goals.
- Switching from low-interest current accounts to higher-paying savings accounts can yield substantial earnings.
Savers Need to go Back to Basics
Before making any decisions, it’s essential to review your current savings rate. You might be surprised to discover how low it is. Compare rates offered by different banks and be ready to make the switch if you find a better deal.
It is important that everyone should have a savings account to not only save money for a rainy day, but to build a nest egg for the future.
Accreditation is Key
Ensure that any bank or savings account you consider is protected under the Financial Services Compensation Scheme (FSCS). This protection guarantees you up to £85,000 per person if the bank or building society fails, providing peace of mind for your savings.
Don’t Be Put Off by a Lack of High Street Presence
Don’t limit yourself to traditional high street banks. Many leading savings providers operate without a physical presence but offer competitive rates. If the bank is FSCS-protected and offers a significantly better rate, don’t hesitate to switch.
ISA or Non-ISA?
Consider tax implications when choosing your savings account. ISAs are an excellent way to save up to £20,000 tax-free per tax year. For those approaching the threshold for taxation on their interest income, ISAs can help reduce the tax burden, even though they may offer slightly lower interest rates.
It might also be sensible to consider saving into a LISA savings account. A LISA (Lifetime Individual Savings Account) is a type of savings account available in the UK that allows individuals to save for their first home or retirement.
It offers a government bonus on contributions, providing a 25% boost to the savings, up to a certain limit, each tax year. However, there are specific rules and restrictions on withdrawals and usage, so it’s essential to understand the terms before opening a LISA.
Use the Right Account for You
Different savers have different needs and you need to find the right savings account for your personal circumstances. Tailor your choice of savings account to your financial goals. If you need quick access to your funds, consider easy access or notice accounts.
On the other hand, fixed-rate accounts can provide better returns for long-term savers.
Avoid Low-Interest Paying Current Accounts
Our research reveals that almost half of British savers (46%) are wasting money by leaving their savings in low-interest current accounts. Making the switch to a dedicated savings account could yield significant returns, such as £926 on a £20,000 investment with a market-leading 1-year fixed rate ISA at 4.63% AER (gross).
Spend a spare 20 minutes wisely by opening a higher-paying savings account and earning more on your hard-earned money.
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Switching accounts can lead to significant financial growth and ensure that you get the returns you deserve on your savings. Consider the top tips provided and take action now to make the most of your hard-earned money. With the right account and proper planning, you can pave the way towards a brighter financial future.