Savings warning as Britons miss out on extra £619 – banks 'blatantly profiteering’

Major banks have been accused by MPs of “profiteering” because providers are not extending interest rate rises to savers as they have for mortgages.

Banks are urged to offer fairer rates on savings products and educate people on the ease of setting up savings accounts to ensure their money works harder for them.

Around 12.6 million (nearly a third) of UK adults hold most of their savings in a current account with their main provider. As a result, they are missing out on up to £619 each in interest a year, new research suggests.

Atom Bank has released new research as part of its “Get paid, not played” campaign. The research suggests a need for better financial education on the monetary advantages of savings accounts, particularly among younger age groups.

Millions are missing out on almost £8billion, by holding their money in a current account rather than a market-leading easy-access saver.

The findings reinforce the need for people to be aware of the benefits of making their money work harder for them in higher-interest savings accounts, rather than leaving their savings languishing in current accounts which pay little interest.

For instance, an individual with £20,000 might earn around £200 at best – and potentially nothing – within a standard current account.

In contrast, investing in a market-leading one-year fixed rate ISA at 4.63 percent AER (gross) would make a substantial £926 savings over the same period. The absence of current accounts offering rates equal to or higher than the current inflation rate increases the problem further.

Atom’s analysis shows that the average high street bank easy access account pays just 0.97 percent today, with the current market leader paying 4.21 percent.

The Treasury and the FCA have both openly questioned high street banks on their “measly” easy access rates.

While mortgage costs have surged with higher interest rates, savings rates have not increased at the same pace, prompting Chancellor Jeremy Hunt to highlight the urgent need for a solution amid the challenges faced by households grappling with the escalating cost of living.

The leaders of Lloyds, HSBC, NatWest, and Barclays will convene with the Financial Conduct Authority on Thursday.

Harriett Baldwin MP, Chair of the Treasury Committee, pointed to recent results announcements, which show that the UK’s biggest banks are continuing to squeeze record profits from their loyal savers.

Mark Mullen, CEO at Atom Bank, said: “The notion of free banking is a myth. The customer pays for everything. Be that flashy TV adverts, high street branches or whizzy current accounts, the cost of everything is passed on. This is often in the form of a terrible rate on current accounts and savings products, where UK savers are missing out on billions in interest.

“Moving money to a decent savings provider can mean hundreds of extra pounds a year in your pocket. We’ve seen a rise in the use of the Current Account Switch Service as customers take advantage of one-off payments to move, so there’s no reason why savers shouldn’t be proactively making the switch too.”

The Treasury Committee has written to the bosses of major banks to ask if they believe all their savings rates provide “fair value” to customers and whether customer inertia is being exploited.