A leading consumer champion has issued a stark warning to UK savers, urging them to look beyond the big high street names to avoid missing out on hundreds of pounds in interest.
The High Street Savings Trap
Matthew Jenkin from the consumer group Which? has highlighted a significant financial pitfall for households. He explained that limiting your search for a savings account to the well-known high street brands is one of the biggest mistakes you can make. While the familiarity of a household name may feel secure, it often comes at a high cost to your potential returns.
Mr Jenkin provided a clear example based on a £10,000 deposit. Placing that sum in a typical high street instant access account, paying the average rate of 1.15% AER, would generate just £115 in interest over a year.
However, investing the same amount in a top-performing account for larger deposits, currently offering up to 4.48% AER, would see your annual interest leap to £448.
"That’s a difference of more than £300," he emphasised, urging savers to consider smaller, lesser-known providers.
How to Protect and Grow Your Money
For those nervous about moving their money, Jenkin advised performing checks to ensure any new provider is protected by the Financial Services Compensation Scheme (FSCS). He also warned savers to be vigilant about several key areas.
Firstly, he pointed out that savings rates can change rapidly and neglecting your accounts is costly. This is particularly true for fixed-term bonds. "Unless you tell your bank what to do when the bond matures, your provider may automatically move your cash into a lower-paying account," he said.
Secondly, while some savings platforms offer exclusive deals and alerts for better rates, watch out for fees. These can be deducted from the displayed interest rate or taken as a percentage of your balance.
On longer-term fixes, Jenkin urged caution. "While rates are falling now, a lot can change in just a few years," he stated, noting that those who locked into long-term fixes before rates recently rose are now stuck with poor returns.
Tax and the Upcoming ISA Rule Change
The expert also reminded savers of the Personal Savings Allowance. Currently, basic-rate taxpayers can earn £1,000 in interest tax-free, while higher-rate taxpayers have a £500 allowance.
For larger sums, a cash ISA remains a key tool to shield savings from tax. Savers can currently invest up to £20,000 per year tax-free. However, Jenkin highlighted a major change coming in 2027.
"From 2027, the amount you can hold in cash will fall to £12,000 for savers under 65," he explained. "To use the full £20,000 ISA allowance, the remaining £8,000 would need to be invested in a stocks and shares ISA."
His overarching message is clear: proactive management and shopping beyond the high street are essential for maximising savings in today's market.
