Huge ‘zombie account’ money mistake is costing 49million customers up to £1,700 – how to avoid it with simple fix

MILLIONS of Brits are unwittingly losing out on interest because their savings are sitting in so-called “zombie accounts” earning almost nothing. New analysis for The Sun has revealed that 49.3million savings accounts across the UK are earning 1.5% or less in interest, despite this being far below the rate of inflation. This means that in real terms their money is losing value as it’s not keeping up with the rate that prices are rising. Together, these accounts hold a huge £327billion, according to research by savings app Spring, which analysed data from CACI. Sign up for the Money newsletter Thank you! The average balance sitting in one of these low-interest accounts is £6,626, but the real shock comes from where most of the cash is stashed. Around £275billion of that total is held in accounts with balances of more than £10,000, meaning huge sums of money are earning next to nothing every single month. Even more surprisingly, more than 365,000 accounts holding balances over £100,000 are also earning just 1.5% or less, with a combined total of £72.6billion sitting in these so-called “zombie accounts.” On average, accounts earning less than 1.5% are only paying out 1.03% interest, while even accounts with £10,000 or more only manage an average rate of 1.04%. Derek Sprawling, Head of Money at Spring, said many savers may not even realise how much they are missing out on. He said: “With £327 billion sitting in savings accounts paying 1.5% or less, too much of the nation’s money is earning far less than it could.” Most read in Money He added: “Much of this is held in accounts with balances above £10,000, with some savers holding significantly more while earning very little interest. “Many people may think they have to accept a lower rate to move money instantly to their current account, but that is no longer the case.” How much could you be missing out on? Experts say the simple fix lies in switching to accounts that offer easy access without sacrificing a decent interest rate. This keeps your cash accessible, so you can grab it when you need, but still makes sure you’re not losing out on the returns it could be making. For example, cahoot’s Sunny Day Saver account currently offers the top easy-access rate on the market, paying savers 5% on balances up to £3,000, with just £1 needed to open the account. Meanwhile, Spring’s app, which uses Open Banking technology, connects directly to customers’ existing current accounts, allowing savers instant access to their money while still earning a competitive rate of 3.82%. To put that into perspective, someone with £10,000 sitting in an account paying just 1.5% would earn £150 in interest over a year. But if that same £10,000 was moved into Spring’s account paying 3.82%, it would earn £382 over the same period, an extra £232 simply for switching, with no loss of access to the money. For those wanting a bit more certainty over their savings, it might be worth considering locking away some of your money in a fixed bond, which offers a set interest rate for an agreed period of time. At the moment, some of the top rates include a one-year fixed bond from thisbank paying 4.93%, a two-year fixed bond also from thisbank offering 5%, and a three-year fixed bond from the same provider paying 5.04%. All three require a minimum deposit of £100, with interest paid on the anniversary of opening the account. There is also a five-year fixed bond from Hampshire Trust Bank paying 5.05%, which only requires £1 to open, also with interest paid annually. It means if you were to invest £10,000 into these accounts, you could earn significantly more in interest compared to leaving your money in a low-paying easy-access account. Over one year, the thisbank bond at 4.93% would earn £493 in interest. Over two years, the 5% bond would earn around £1,025, while the three-year bond at 5.04% would build up to roughly £1,594 by the time it matures. For those happy to lock their money away for longer, the five-year bond from Hampshire Trust Bank at 5.05% would earn approximately £2,792 in interest over the full term. By comparison, the same £10,000 left in an account paying just 1.5% would earn only around £1,077 in interest over five years, meaning switching to the fixed bond could leave savers roughly £1,715 better off over the same period. However, it’s worth remembering that once money is placed into a fixed bond, it usually cannot be accessed until the term ends, so savers should only consider this option for money they are confident they won’t need in the short term. Comment now