Brits with savings accounts have been warned they could be losing around £370 per year due to a 'loyalty penalty' as inflation remains steady. On Wednesday, June 17, the Consumer Price Index (CPI) held at 2.8% during May, while the Moneyfacts Average Savings Rate stands at 3.57%, well above inflation.
Inflation-Beating Accounts Available
Moneyfacts reports there are currently around 1,825 savings accounts that beat inflation, including 213 easy access, 179 notice accounts, 183 variable rate ISAs, 403 fixed rate ISAs, and 847 fixed rate bonds. These accounts allow savers to achieve real-terms returns without the value being diminished by price rises. However, if you haven't shopped around and remain on one of the many accounts lagging behind inflation, you may be losing out unnecessarily.
Expert Advice on Switching
Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk, emphasized the importance of shopping around for the best deal. She stated that failing to switch could result in a loss of £373 per year. Eastell noted that major high street banks are lagging, with their most flexible accounts offering just 1.16% collectively, leaving savers with little protection against rising prices.
In contrast, some challenger banks offer market-leading easy access rates of up to 4.89%. Eastell highlighted that savers with £10,000 in a big bank easy access account will earn just £116 a year, compared to the £489 they could earn by switching to the best account. She referred to this £373 difference as a 'loyalty penalty'.
Eastell added that once savers are aware of this, the real-term benefit is difficult to ignore, and they will be better off once they make the switch. She noted that over 200 easy access accounts pay inflation-busting rates, making it hard to stay put.
Financial Adviser's Perspective
Riz Malik, Independent Financial Adviser at R3 Wealth in Southend-on-Sea, also urged savers to look around for the best rates. He advised not to assume your bank's current account will give you market-leading rates on your savings. Malik acknowledged that opening accounts can be tiresome but pointed out there are platforms that allow you to switch between savings accounts with relative ease.
