The annual rate of UK CPI (Consumer Price Index) – a measure of inflation – has fallen to 2.8% in April, down from 3.3% in March. That’s an improvement, but it’s still above the Bank of England’s 2% target, and well above what some of the big banks are paying on easy (withdrawals typically take one working day) and instant access (allows instant withdrawals) savings accounts.
In other words, if your savings are earning less than 1%, and prices are rising at nearly three times that, you could be missing out on serious savings.
This article isn’t personal advice. If you’re not sure if an action is right for you, ask for advice.
What’s the cost of doing nothing?
If your savings are sat in one of the UK’s biggest banks, there's a good chance you’re earning less than you could be.
For millions across the UK, many will choose to stick their savings with their high-street bank by default. But a lot of the biggest names are paying interest rates that not only trail the market but are failing to keep pace with inflation.
The scale of the problem? Nearly £70bn of UK savers’ cash currently earns 1% interest or less.
And even if you’re saving with one of the UK’s many ‘challenger banks’, there’s still a chance you could be missing out on better returns.
Is your bank in the 1% club?
Lower interest rates aren’t just a ’big banks’ problem. There’s a surprisingly wide group of banks and building societies offering poor rates.
Check out the ‘1% club’ below – some of the UK banks offering interest rates of just 1% AER or less:
AER stands for Annual Equivalent Rate and show what the rate would be if interest was paid and compounded once a year. It helps you compare the rates on different savings products.
Gross is the rate without any tax removed. Interest is paid gross. You are responsible for paying any tax due on interest that exceeds your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change
Bank of Scotland (instant access) |
Barclays Bank (easy access) |
Chorley Building Society (easy access) |
Earl Shilton BS (instant access) |
Halifax (easy access) |
Lloyds Bank (instant access) |
Melton BS (instant access) |
Metro Bank (instant access) |
Punjab National Bank (International) Limited (instant access) |
Reliance Bank (instant access) |
TSB (instant access) |
Union Bank of India (UK) Ltd (instant access) |
Natwest (instant access) |
Remember, better rates are out there, but the ’big banks’ – and others like them – rely on inertia. They know many of their clients have been banking with them for years, and the idea of switching can feel like more trouble than it’s worth to most savers.
So, check if your bank is part of the 1% club and if it is, it could be time to consider your next move.
How much could you be missing out on?
On £10,000 of savings earning 1% AER interest you'd get just £100 over a year.
The best easy access rate currently available through Active Savings is 3.95% AER (variable), which over a year would return £395. That’s almost £300 difference from one quick switch. And the bigger your balance, the bigger the gap becomes.
Has your savings bonus rate expired?
Challenger banks have become popular alternatives to the big banks – and for good reason. Many offer genuinely competitive rates, and they've helped push the market in the right direction. But there's still a catch.
A number of these banks attract new clients with eye-popping bonus rates, only for those rates to quietly drop after 12 months. If you opened an account with a challenger bank a year or more ago and haven't checked your rate since, the rug may’ve already been pulled.
So, take a look to see what kind of returns you're getting on your cash, because there's every chance you’re earning far less than you could be.
Leaving the club is easy
Fortunately, there’s a simple solution to the low interest problem – move your money elsewhere. With just a few minutes of admin, you could reach your savings goals much faster.
Whether you have £1,000 or £100,000, moving your money to a better-paying home could make a meaningful difference. Your next step isn’t complicated – but it might be closer than you think.
One account. Rates from 30+ banks. No hassle.
Tired of playing the big banks’ games? Set your own rules, with our Active Savings Account. It lets you pick, mix and switch between savings rates from more than 30 banks, all from one easy-to-use online account.
It’s completely free to open, and you can choose from a wide range of easy access and fixed-term rates. Plus, if you find a better rate later, you’re free to take advantage of it without the hassle of switching platforms. But choose carefully, because if it’s a fixed term product, you cannot usually move the money until the product has matured.
Today’s top saving rates available through our Active Savings Account include up to 3.95% AER (variable) easy access, and up to 4.61% AER (fixed) 5-year fixed rate. Rates can be added or withdrawn at anytime.
This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.
The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown (company number 2122142).