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.”
