Customers with the big four UK banks – Barclays, HSBC, Lloyds Bank, Natwest – have been warned they could be missing out on triple the returns on their savings.
Experts at savings provider Sidekick Money say now is the time to look around for a better rate, as the base rate may change again soon and the market is « very dynamic and competitive ».
Matthew Ford, CEO of the firm, had a particular warning for those who have savings with the major UK providers. He explained: « The average easy access cash ISA rate across the big four banks is around three times lower than what’s available in the market. It’s a similar story to non-ISA accounts. »
For example, the Cash ISA Saver with Lloyds Bank currently pays just 1.15% at its lowest rate, while the top-paying cash ISA on the market according to moneyfactscompare.co.uk is at more than 5%.
Mr Ford said there are several things to consider when looking to switch: « Where you put your savings depends on your financial situation, your risk appetite, and what you’re looking for in a product.
« For pure rate chasers there are all sorts of complicated savings accounts with non-traditional providers where you can maximise your rate. »
He encouraged people to check that the account is part of the Financial Services Compensation Scheme, meaning your holdings are protected up to £85,000.
Mr Ford said cash ISAs can be a good option as many accounts are « flexible and offer competitive rates ». With April and the turn of the tax year coming up, he urged people to max out their ISA allowance of up to £20,000 in deposits.
ISAs are entirely tax-free, with none of your interest earnings or investment growth liable for a HMRC bill.
Brian Byrnes, head of personal finance at savings provider Moneybox, also urged savers to see what’s on the market, pointing to the extra earnings you could get with a cash ISA switch.
He stated: « While the average variable rate cash ISA currently stands at 1.8%, there are numerous other options offering interest rates exceeding 5% readily available, so it’s important to shop around to find the best product for your needs.
« For a saver contributing £20,000 annually, this could translate to an additional £640 in interest savings so it’s well worth your time. »
With a clarion call for all savers, he said: « Everyone should ensure they are making the most out of their personal savings allowance as well as their annual ISA savings allowance. »
With your personal savings allowance, a basic rate taxpayer can earn up to £1,000 a year in interest tax free, not including earnings from tax-free ISAs.
Those on the higher rate can earn £500 a year in interest while those on the additional rate have no allowance.
Explaining the ISA allowance, Mr Byrnes said: « This allowance can be split across different ISA products depending on someone’s financial goals, including a Lifetime ISA if saving for your first home, a Cash ISA if you’re saving for short or mid-term financial goals or a Stocks & Shares ISA to grow your money over the longer term. »
