Leaving savings in a poor performing account may not be the best place for your savings – especially when low interest
rates, high inflation and expensive charges are eating in to your cash.
The traditional scramble by banks and building societies to grab cash for ISAs is in full swing, but
savers should consider looking beyond the headline rates and see how investments from previous
years are performing.
Most sensible financial advisors would suggest savers become rate ‘tarts’ by switching providers
and aggregating their savings for better rates where they can.
This means look at any exit penalties on your current investment accounts before transferring the
cash to someone paying more.
Independent financial research firm Defaqto has revealed the average interest rate paid by newly
launched easy access savings accounts and Cash ISAs are significantly higher than those paid to
savers last year.
Here’s their findings:
Easy access savings accounts
The average gross annual equivalent rate of interest on a balance of £1,000 is currently:
• 2.26% for accounts launched to date in 2011
• 1.99% for savings accounts that were launched during 2010
• 0.64% for easy access savings accounts which were launched before 2010
Easy access Cash ISAs
The current average gross AER interest payable on a balance of £5,100 (the current annual
investment limit for Cash ISAs) is:
• 2.43% for Cash ISAs launched so far in 2011
• 2.07% for accounts that were made available to savers in 2010
• 1.31% for Cash ISAs that were launched prior to 2010
David Black, Defaqto’s Insight Analyst for Banking, said: “Our research illustrates that newly
launched savings accounts generally offer higher rates than those accounts which have been around
for some time.
“Inertia is costly and savers need to realise that accounts which originally appeared in best buy
tables may not remain competitive as time progresses. Quite simply, reviewing your account on a
regular basis, and changing it to a more competitive deal, will increase your returns.
“In this era of low interest rates it really is worthwhile shopping around for newer, alternative
options that will make your money work harder. As many banks and building societies are offering
introductory bonuses and guaranteed minimum rates it really does pay to take advantage of them.
“If you are looking to close an account, do be mindful of any withdrawal restrictions or penalties
that may apply.”
