Many savers may unknowingly miss out on higher returns due to common misconceptions about where their money is safest. New research from Shawbrook found that a fifth (21%) of respondents admit refusing to put their savings in accounts with specialist or challenger banks because they think their money is safer with a mainstream bank.
This could mean someone saving £10,000 could lose as much as £255 a year in interest by refusing to deposit their money in a specialist savings bank. The rates mainstream banks offer are often considerably lower than those of specialist banks.
Research by Moneyfactscompare in January found that the biggest banks – such as Barclays, NatWest, Lloyds, and Santander – have the most flexible easy access accounts in the bottom quartiles of the savings market.
Paul Went, managing director of Savings at Shawbrook Bank, said: “Savers no longer have to settle for lower rates. While specialist banks might not have the same name recognition as some mainstream banks, they can be the best-kept secret for those looking to make their money work harder.”
With ISA season in full swing, savers who limit their options to familiar names risk earning less than they could, and choosing a higher rate doesn’t have to mean sacrificing security.
Any UK bank or building society signed up to the Financial Services Compensation Scheme (FSCS) protects deposits up to £85,000 per person per institution. This means savers benefit from the same level of protection whether they choose a well-known bank or a specialist provider.
With more than a third (35%) of respondents expressing no loyalty to any bank, there is a clear opportunity to grow their nest egg. One in three (34%) savers say that higher interest rates would be a key factor in prompting them to open a new account.
Mr Went added: “Inflation is increasing again, so every pound of interest earned matters.”
According to the Bank’s analysis of CACI data, 1.5 million ISA accounts maturing between February and the end of April. Mr Went said: “Now is the time to start looking at new accounts and using up any remaining ISA allowance.
“By broadening their search beyond the brands they already know, savers really can have their cake and eat it too.”
Rachel Springall, finance expert at Moneyfacts, said: “Loyalty does not pay, which is why savers need to look beyond the biggest brands when comparing savings rates. Regularly reviewing and switching pots is essential when interest rates change, particularly when base rate cuts flow into the savings market.”
She added: “There are a multitude of brands covered by the Financial Services Compensation Scheme (FSCS), so it’s wise for savers to take some time to navigate the different options out there which could offer better value.”
