KATIE ELLIOTT: Brits urgently need to act to stop totally avoidable costs.
Katie Elliott (L) warns that Brits should avoid making this saving mistake (Image: Getty Images)
Are you one of the 56% of Brits who haven’t shifted their savings into a higher-paying account in the past year? Now isn’t the time to let your money languish, as new research by Hargreaves Lansdown shows this could be costing you as much as £992 a year. Interest rates are edging down by the week – and the trend looks set to continue.
Economists widely expect the Bank of England to cut the base rate from 4% to 3.75% on December 18, making savings inertia “particularly dangerous” right now, according to Sarah Coles, Hargreaves Lansdown’s head of personal finance. This is because people assume that when the base rate falls, all savings rates fall in tandem, so they don’t bother switching. This isn’t true, and loyalty doesn’t pay.
High-street banks tend to be the quickest to pass on base rate cuts, while challenger banks continue to dominate the market.
At the time of writing, the top easy access savings account pays 4.5% AER, offered by the digital bank Chase. Meanwhile, the big high street banks are paying an average interest rate of 1.15%. With inflation currently at 3.6%, the real value of your savings erodes every month.
For someone with £20,000 in a typical high-street easy-access savings account earning 1.15%, sticking with this rate will cost around £688 per year.
Among the top 20% of UK earners who hold an average of £29,898 in savings, the losses are even more stark. The gap between high-street rates and the best deals on the market equates to an estimated £992 per year.
Check websites such as Moneyfactscompare.co.uk for top rate savings tables. Digital banks like Chase, Cahoot and Atom Bank are currently offering some of the best returns on the market for easy access savings accounts. For fixed rates, the top-paying accounts yield between 4.26% and 4.55%, depending on the bond’s term.
Review your savings accounts now and switch if you’re being short-changed. Just make sure any provider you choose is authorised by the Financial Services Compensation Service (FSCS), which protects up to £120,000 of your cash.
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DEAL OF THE WEEK
Have a smart meter? Uswitch is offering UK households, regardless of their energy supplier, free electricity on Christmas Day between 8am and 4pm (up to a value of £10).
Just connect your smart meter to the free Uswitch app, and sign up to Power Hours, the company’s energy saving scheme. In January, Uswitch will calculate how much electricity you used during the promotional hours, and you can withdraw the equivalent value directly from the app into your bank account.
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A huge amount of government support goes unclaimed every year – £24.1billion in 2024 alone. That’s money sitting idle, meaning millions of people could be entitled to an income boost but simply aren’t applying for it.
Depending on your age and circumstances, a wide range of financial support is available from the Department for Work and Pensions.
If you’re aged 66 and over and have care needs due to a physical or mental health condition, look into Attendance Allowance. This benefit isn’t means-tested, so your income and savings won’t affect eligibility, and it can be worth up to £5,300 a year at its highest rate. Research suggests around 1.1 million more people could be eligible to claim it, but aren’t.
If your weekly income is less than £230 as an individual, or less than £350 as a couple, you could be eligible for Pension Credit. It also unlocks extra support, such as free NHS prescriptions, dental treatments, and help with heating costs through schemes like the Warm Home Discount and Cold Weather Payment.
Worryingly, £1.6billion of this support is going unclaimed by over 750,000 eligible pensioners.
If you’re below state pension age and have difficulty getting around due to a physical or mental health condition, you could qualify for Personal Independence Payment (PIP) instead. This can be worth up to £749 per month at its highest rate.
And if you live alone, you should qualify for a council tax reduction of 25%. Those who receive certain income-related benefits, such as Universal Credit or Pension Credit, could qualify for an even larger reduction.
Social tariffs are also available for utility bills, yet £2.6billion worth is going untouched.
These tariffs offer more affordable deals for low-income households receiving certain benefits. Snapping one of them up could reduce your broadband or phone bill to just £10 per month, or your water bill by up to 90% in some areas.
It’s up to you to apply. Use Turn2Us’s Benefits Calculator or TSB’s Lightning Reach portal on www.lightningreach.org to find support you might be entitled to.
