Banks cash in on savers with £1 trillion in accounts paying pittance

Is your savings account taking you for a ride? Big banks cash in with £1trillion now languishing in legacy pots paying a pittance

  • Savers with the big banks hold some £866 billion earning as little as 0.01%
  • They keep a further £250 billion in current accounts which pay no interest 
  • Yet other easy access providers now pay as much as 0.67 per cent or £67 a year 


Big banks are cashing in on savers who hold billions of pounds in accounts that pay a pittance.

Santander has increased its net interest margin — the difference between what it pays savers and charges borrowers — by a fifth over the past year, from 1.59 per cent to 1.91 per cent. This is after the bank slashed the rate on its popular 123 account from 1.5 per cent at the start of 2020 to just 0.3 per cent now.

At Lloyds Banking Group, which includes Halifax, the margin has crept up by 5.4 per cent over the first nine months of the year. It’s now 2.55 per cent, up from 2.42 per cent a year ago.

Savers hold some £866 billion in easy-access accounts with big banks, which pay as little as 0.01%. This is an increase of £179bn since the start of the pandemic

Savers with the big banks hold some £866 billion in easy-access accounts, which pay as little as 0.01 per cent. 

This is an increase of £179 billion since the start of the pandemic. They keep a further £250 billion in current accounts which pay no interest — a rise of £59 billion.

With inflation set to soar to as much as 5 per cent by spring 2022, there are currently no cash accounts that can protect your money from the rising cost of living.

Easy-access accounts with banks such as Barclays, HSBC, Lloyds, NatWest, Santander and TSB typically pay just 0.01 per cent interest. 

This works out at a paltry £1 in interest a year on each £10,000 — not even enough to buy a cup of coffee.

Yet other providers now pay as much as 0.67 per cent or £67 a year. And this gap is only set to widen if interest rates rise soon, as expected. Shawbrook Bank’s online account offers the best rate, and requires you to deposit at least £1,000.

Anna Bowes, from Savings Champion, says: ‘Big banks are renowned for not passing on any base rate rise in full. Even if they were to, you would still lose out because they pay such low rates.’

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says: ‘If you are lucky enough to have been building up savings during the pandemic, you need to switch it from your current account to protect it.’

With inflation running at 5 per cent, £10,000 in savings will, after a year, give you the same buying power as £9,500 today — a loss of £500. 

If you move this cash to a top easy-access account, one paying 0.67 per cent, you’ll reduce this loss to £433. 

Some savers may feel nervous about moving their money to lesser-known banks. But when consumer champion Which? asked nearly 4,500 savers to rate their provider on customer service, interest rates and how easy it was to open an account, Marcus by Goldman Sachs and Coventry Building Society scored among the best.

Marcus’s instant access account, which is available only online, pays 0.6 per cent for 12 months, after which the rate will drop to 0.5 per cent. 

Coventry BS pays 0.3 per cent to new customers with its Easy Access Saver account, which is available by post, telephone or online.

Coventry’s Limited Access Saver, at 0.5 per cent, is also competitive, as long as you do not make more than six withdrawals a year.

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