Martin Lewis has issued a warning to savers, particularly those on certain benefits, who may be missing out on a significant income boost. The consumer champion spoke on his BBC podcast after a couple in their 50s, receiving Employment and Support Allowance (ESA) and Carer's Allowance, asked about tax on their savings interest.
The couple, with £150,000 in savings earning £2,300 annually, were concerned about a potential tax bill. However, Lewis suggested they were asking the 'wrong question', noting that their interest rate was too low. He pointed out that many accounts now pay over 4%, with some at 4.5%.
Lewis stressed the urgency, given the couple's circumstances: 'I suspect life is quite difficult... it's really important that you make those savings work as best as they possibly can for you.' He calculated that switching to a 4% account could yield £6,000 in interest, and at 4.5%, £6,750—an extra £2,700 to £4,450.
To protect savings from tax, Lewis recommended using ISAs, which allow up to £20,000 per person per year. He also suggested competitive easy access accounts offering up to 4.5%. Regarding tax, he noted that the couple's income from benefits is likely below the personal allowance of £12,570, so they would not pay tax on interest. Additionally, they may benefit from the starting rate for savings, which provides an extra £5,000 allowance for interest earnings.
