UK savers are £1,000 better off now than at start of pandemic – but they are stashing the extra cash in easy-access accounts paying meagre interest
The typical UK saver is £1,000 better off than they were prior to the pandemic, but they are more likely to stash their cash in a low-interest easy-access account.
The average savings balance has risen from £11,141 in March 2020 to £12,145, according to CACI data analysed by Paragon Bank.
The savings data, captured from more than 30 banks and building societies, shows total savings having grown by 8.3 per cent since the pandemic started, climbing from £903billion to £978billion.
Rainy day fund: Money in easy access accounts makes up an enormous 60.6% of the entire savings market – an increase of 17.4 per cent since March 2020
But Britons appear to be pouring their lockdown savings into easy access accounts rather than higher-paying fixed rate deals.
The average easy access balance has grown by £1,450 since the pandemic began from £10,246 to £11,696.
Money in these accounts is collectively worth £593 billion, meaning that more than 60 per cent of Britain’s savings is stashed away in them.
It is thought that the trend has largely been driven by the uncertainty caused by the pandemic.
As their name suggests, savers can take their money out of an easy-access account whenever they like, without a penalty.
しかしながら, they pay much lower interest. The best-buy easy access rate is currently 0.65 パーセント, but by putting their savings away in a fixed-rate account for just one year a saver could earn more than double that at 1.45 パーセント.
James Blower, founder of consultancy the Savings Guru said: ‘We are seeing more money in easy access accounts – largely driven by Covid.
‘Firstly by people having extra savings because of lockdowns – saving on travel costs, 休日, not being able to go out etc.
‘These people aren’t sure what to do with their spare cash, so are leaving in easy access until they are.
「第二に, this trend has been caused by the uncertainty Covid has created which means people who can are keeping more of a buffer for future in case there are more disruptions.’
Another savings product that Britons appear to have flocked to during the pandemic is regular saver accounts, with total balances rising by almost 38 per cent from £11.8billion to £16.3billion since Covid restrictions began.
Regular saver accounts enable savers to save a fixed amount every month, albeit typically with a minimum or maximum limit on how much can be deposited each time.
例えば, the market leading deal offered by Cambridge Building Society pays 5 per cent interest on its extra reward regular saver アカウント, but limits monthly deposits to £250 with a maximum balance of £3,000.
Customers will also need to have another product with the building society to be eligible.
|Type of account (min investment)||0% tax||20% tax||40% tax|
|Accounts WITHOUT bonus – These rates are not boosted by a temporary bonus that drops off after a year|
|Family BS Premier Saver 4 (£10,000+) (10)||0.65||0.52||0.39|
|Shawbrook Bank Easy Access 27 (£1,000+)||0.62||0.50||0.37|
|Aldermore Double Access (£1,000+) (9)||0.60||0.48||0.36|
|Charter Savings Bank (£5,000+)||0.60||0.48||0.36|
|Investec Online Flexi Saver (£5,000+)||0.58||0.46||0.35|
Instant-access cash Isas have also remained popular since the pandemic began, with the amount saved in these accounts rising from £176billion to £187billion.
しかしながら, whilst easy access deals have boomed, many savers appear to have given the fixed rate savings market somewhat of a wide berth.
Fixed-rate deals have seen an exodus of cash, with total savings in these accounts having fallen by 21 per cent from almost £98billion to almost £73billion since the pandemic began.
Fixed-term Isa products, which also offer better interest to those willing to lock away their cash for a set period, have followed a similar pattern.
The balance held in these fell from roughly £87billion in March 2020 to £78billion as of July this year.
Despite the easy access craze, industry experts suggest the trend could be reversing back towards fixed rate deals now that rates have improved and the worst of the lockdowns appear to be behind us.
‘We saw best-buy easy access rates fall to 0.40 per cent in March, with one-year fixes at just 0.56 パーセント,’ said Blower.
‘This gave very little incentive for savers to tie up their money.
‘Now that differential is 0.65 per cent compared to 1.45 パーセント, so there’s an attraction to lock away for savers.
'結果として, what I am seeing in the market is more money moving to fixed rate savings. One-year fixed rates were the most-searched-for product on Savings Guru in September, and in October so far too.
‘I think this trend of money moving back to fixed rates will continue ,and we will also see more of those lockdown savings balances being spent too – so I think easy-access balances have probably reached their high point.’
Easy access versus fixed rate deals
The best paying easy-access deal currently available is via the Family Building Society, paying 0.65 パーセント, although savers have only until 5 November to add money to this account.
Digital savings platform Chip is also offering an even better 0.70 per cent rate via Allica Bank, though customers will need to sign up to the service and pay the membership fee of £1.50 per month to access it.
This rate offered exclusively to Chip customers and through this link via This is Money, comes with Financial Services Compensation Scheme protection of up to £85,000 per person and allows savers to deposit a maximum of £30,000 into the account.
|Type of account (min investment)||0% tax||20% tax||40% tax|
|Al Rayan Bank (£5,000+) (3)||1.45||1.16||0.87|
|Kent Reliance (£1000+)||1.33||1.06||0.80|
|Al Rayan Bank (£5,000+) (3)||1.76||1.41||1.06|
|Gatehouse Bank (£1,000+) (3)||1.60||1.28||0.96|
|Al Rayan Bank (£5,000+) (3)||1.81||1.45||1.09|
|Gatehouse Bank (£1,000+) (3)||1.78||1.42||1.07|
|Gatehouse Bank (£1,000+) (3)||2.05||1.64||1.23|
|QIB (英国) (£1,000+) (3)||2.00||1.60||1.20|
You can find out whether this might be right for you by reading our review of Chip’s exclusive deal here.
The savings platform, Raisin, is also offering a £50 welcome bonus to any new customer who puts £10,000 or more into a savings account.
Although its best easy-access account pays 0.45 パーセント, the addition of the welcome bonus means that someone stashing away £10,000 could earn £95 in the first year – an effective return of 0.95 パーセント, superior to the Chip rate.
Unlike with Chip, Raisin charges no account fees for its service, so savers returns won’t be eroded by a monthly charge.
しかしながら, for savers prepared to lock their money away for a year or more, the potential returns are higher.
The leading one year fixed rate deal, via Al Rayan Bank, currently pays 1.45 パーセント, although savers will need a minimum deposit of £5,000 to get started.
The Birmingham-based bank is Sharia-compliant, which means it cannot offer customers guaranteed interest. Instead it offers an expected profit rate from accounts.
These types of accounts have become more mainstream and often appear in This is Money’s independently compiled best-buy tables.
Al Rayan Bank is also offering the best two and three year fixed rate deal, paying 1.76 パーセントと 1.81 それぞれパーセント.
Given the higher rates on offer via fixed-rate deals, savers comfortable with locking their money away for a fixed period of time are encouraged to consider these accounts.
This is especially true given the forecast increase in the Bank of England’s base rate early next year, これ could drive up rates further.
Derek Sprawling, savings director at Paragon Bank said: ‘Our tip for savers would be to not overlook fixed rates, especially now that providers are building in the expectation of an increased base rate.
The average UK savings balance now stands at £12,145.
‘The market is forward looking and rates available in the best-buy tables are no longer reflective of the current base rate.
‘It’s important for savers to make the most of competitive rates while they are available as it’s possible the market will remain volatile in the upcoming months.’
James Blower also believes it’s worth fixing for a year to secure a better return on your money.
しかしながら, he suggests not fixing for longer than a year in case interest rates begin to rise.
‘I think savings rates are likely to be stable for the next few months but everything else in the economy points to rates improving in 2022,’ said Blower.
‘My advice to savers is that fixed rates are attractive enough to tie in, compared to easy access, for those that can lock their money away, but don’t fix beyond one year.’