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Leaving their savings in a current account rather than an easy access ISA is costing British savers £2 billion in interest.
Recent data from Yorkshire Building Society suggests that UK savers are missing out on £2 billion in interest by not switching their Current Account savings to easy access ISA accounts.
“It’s no secret that savers are having a tough time at the moment with unfavourable market conditions,” said Chris Irwin, Director of Savings at Yorkshire Building Society.
“Making the switch from low-paying current accounts into an accessible ISA is one way savers can make their money work harder but also support those who value access to their funds throughout the year,” he explained.
Currently, there is £455 billion in current accounts across the UK, according to CACI data. With the average account holding £5,600, savers are only accessing an average interest rate of 0.06%, the Yorkshire Building Society said.
This has led them to claim that if this money was switched to an ISA account, with an average rate of 0.50%, this would increase the collective interest by £2 billion.
“There’s a lot of things that are out of savers’ control such as rising inflation, increases to energy and food prices - it’s important savers focus on elements they can control and think about how they can make their hard-earned cash go as far as possible,” said Irwin.
While Yorkshire Building Society used an average easy access rate to illustrate its point, savers could in theory benefit from greater interest if they switched to a market-leading provider. According to our data, the best easy access ISA currently offers a rate of 0.77%.
In addition, for those who do not need instant access to their savings, the interest you can gain on fixed-term ISAs is greater. Currently there are fixed term ISAs which offer as much as 1.90% over a five year term.
“With many people managing to put away extra savings throughout the pandemic, making those funds now work as hard as possible will be even more crucial in the current financial climate,” said Irwin.
With their unique tax advantages, ISAs become popular vehicles of investment for many savers. Therefore, when the end of the tax year approaches, providers generally increase their ISA rates to entice various savers. While some are encouraged to open their ISA before the close of the tax year, providers also encourage early savers at the beginning of the new tax year.
This period is labelled “ISA Season”, but consumers should be aware that the increase in interest is not guaranteed. Instead, this is a historical observation where rates have generally increased during this period before falling in May.
To find out more information on ISAs and the current best rates, view our chart.
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