Experts are warning Britons that “millions of pounds in interest is being lost” in zombie accounts despite interest rates rising significantly over the past year.
Savings accounts have benefited from the Bank of England’s decision to raise the UK’s base 14 consecutive times in recent months.
As it stands, the base rate is now at 5.25 percent and this is being passed onto savers via banks and building societies.
However, many people are unaware they are missing out on these rate hikes which could benefit them financially down the line.
In light of this, financial planners such as Joshua Gerstler from The Orchard Practice are declaring that “there’s no doubt that millions of pounds in interest is being lost by savers unnecessarily”.
Scott Gallacher, a chartered financial planner at independent financial advisers, Rowley Turton, warned that many people are trapped in neglected bank accounts and are unable to make significant gains on their money.
The financial planner said: “I recently assisted a client with approximately £300,000 in stagnant accounts. By switching to better-performing options, we unlocked the potential for up to £18,000 extra in annual interest.
“Hopefully, the FCA’s new Consumer Duty rules, which require financial firms to deliver good outcomes for their clients, will force the banks to change their ways.
“However, I’m not holding my breath, and savers need to be proactive and check their accounts and interest at least once a year to ensure they avoid the Zombie account trap.”
The primary reason interest rates have shot up is due to the UK economy’s ongoing battle with inflation.
For June 2023, the Consumer Price Index (CPI) rate of inflation eased to 7.9 percent, down from 8.7 percent the month.
Despite the CPI rate dropping, inflation in the UK remains significantly higher than the rate in other economies.
However, financial planners can find ways for people to bolster their finances and get rid of their zombie accounts.
Rob Heath, a wealth director at Net-Worth Ntwrk, shared how he is able to help customers boost their finances.
He explained: “As interest rates have risen, our cash management solution has identified several of our existing clients and allowed them to optimise their cash holdings, unlock higher returns, and explore new possibilities for cash, one to the tune of over £25,000 in interest over the past eight months alone.
“This would have otherwise sat in a ‘zombie’ account earning very little or no interest. This is a generational opportunity to earn a return on personal cash, yet still retain full control and access.
“It is unlikely that rates will remain high for a significant period, so it may be short-lived, but it’s an opportunity that savers do not want to miss out on.”
