Savers lose £12bn a year in interest

Savers are missing out on up to £12bn a year in interest - an average of about £300 per person - by holding their cash in low-rate accounts, according to research by Which?.

The consumer group found that almost half of the UK’s 1,200 savings accounts pay 0.5 per cent or less on a balance of £5,000, with one in four paying 0.1 per cent or less. In total, many millions of savers have money in these accounts.

While the poor returns partly reflect the 0.5 per cent base rate – which has been at this record low since spring 2009 – Which? criticises banks and building societies for not keeping customers informed of the rates they are earning and of better accounts. The top-paying savings deals offer nearly 3 per cent for instant access, with up to 4.5 per cent for longer-term fixed rates.

Peter Vicary-Smith, chief executive, said: “Banks are depriving British savers of £12bn a year by keeping us in the dark about the pitiful interest paid on hundreds of savings accounts.”

The consumer group said that few lenders put interest rates on savers’ statements or told them about higher-paying options. Most banks and societies have some competitive deals as well as poor-paying accounts that in many cases are older and no longer promoted.

Santander, the Spanish bank that acquired the former Abbey National, Alliance & Leicester and the savings business of Bradford & Bingley, has the greatest number of ultra low-rate accounts, with 29 out of 53 of its accounts paying 0.1 per cent or less.

Barclays has the highest proportion of poor-paying deals, with two-thirds yielding no more than 0.1 per cent, said Which?

Lloyds Banking Group and Royal Bank of Scotland, the state backed banks, have 22 and 17 accounts, respectively, paying 0.1 per cent or less across their main brands.

Across the five biggest banking groups, including Nationwide building society, almost a half of savings accounts pay 0.1 per cent or less on a balance of £5,000, with more than two-thirds paying 0.5 per cent or less.

Which? said that for lower savings balances even more accounts would pay these near-zero rates, and that building societies were as likely to pay low returns as banks.

The consumer group urged savers to move their cash to better offers, adding that were banks and societies to detail interest rates on statements this would encourage switching.

“There’s an awful of intertia among savers which banks capitalise on,” it said.

However, the British Bankers’ Association claimed lenders “have no interest in keeping customers in the dark”.

It said: “Information is readily available in branches, online and from a variety of other sources, including newspaper ‘best buy’ tables and comparison websites - and customers will also be automatically notified if there are changes resulting in materially lower rates so they can switch their funds.”