Savers are leaving a third of adult ISA and non-ISA instant access balances in accounts earning 1% or less in interest despite the increasing rate environment, Paragon Bank analysis has revealed.

The analysis of the latest CACI data, which compiles the savings deposits of 34 leading providers of adult cash savings, shows that £250 billion is held in instant access accounts earning 1% or less, representing 33% of instant access balances.

By volume, 38.6 million, or 59%, instant access accounts are earning 1% or less, highlighting the poor returns many instant access savers are generating by not seeking out better rates.

Surprisingly, accounts with large balances are included in this group – 27% of all cash held in instant access accounts is earning 1% or less and has a balance of greater than £10,000. This equates to £205 billion, meaning these accounts are missing out on significant rates of interest. By volume, it equates to nearly one in every 10 instant access - or six million – savings accounts.

A saver with £10,000 in an account earning 1% per year would generate £100 in interest. Switching to Paragon’s Triple Access account, which allows three withdrawals per year, at 4.25% would generate interest of £425 over the year.

CACI’s April data shows instant access balances have been in decline in recent months as savers switched to fixed-rate alternatives. Instance access balances across ISA and non-ISA variants ended the month at £765 billion, down from £801 billion at the end of 2022. Conversely, fixed-term balances ended April at £239 billion, up from £181 billion at the end of last year.

Overall adult savings balances ended the month £10 billion higher than in March at £1.05 trillion.

Derek Sprawling, Paragon Bank Director of Savings, said: “Given rates have been increasing across fixed and instant access accounts for over a year now, it’s still surprising that over three in every £10 in an instant access account earns 1% or less. What’s even more surprising is those individuals with significant balances of £10,000 or more in their account earning poor rates of return. I would urge savers to scour the market for better-paying accounts.”

He added: “Fortunately, we have seen a strong uptick in savers moving their money more recently, with many switching to fixed-rate ISAs to protect their cash from tax. But, the amount still held in poor-paying accounts dwarfs that switching activity. With inflation remaining stubbornly high, it’s important that savers are rate savvy and make sure their cash is working hard for them.”

For further information contact:

Michael Clarke
Head of Media Relations
Paragon Bank
07740090746

www.paragonbank.co.uk 

Notes to editors:

CACI data analysed from April 2023

Paragon Bank PLC a subsidiary of the Paragon Banking Group PLC which is a FTSE 250 company based in Solihull in the West Midlands. Established in 1985, Paragon Banking Group PLC has over £14 billion of assets under management, helping more than 340,000 customers to achieve their ambitions.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551.