According to Skipton Building Society analysis of CACI's monthly savings data, More than £116bn in fixed-rate savings will mature by the end of the year. £58.9bn is tied up in non-ISAs and another £57.5bn in ISAs, with savers at risk of seeing a drop from nearly 4.5 per cent to 2.4 per cent if they slip onto variable rates. With over 3.5 million accounts facing a drop in earnings unless they act.
The analysis was carried out by Skipton Building Society, which also commissioned research of 2,000 adults, which revealed that 39 per cent rarely or never move their money around.
Of those who rarely move their money around, 21 per cent find it too complicated, while 18 per cent prefer to keep their money in one place. But 12 per cent worry about losing access to their funds if they were to transfer them, with 31 per cent suffering from ‘money moving paralysis’.
CACI data shows that Non-ISA accounts maturing between September and December are coming off an average rate of 4.53 per cent compared to the current average easy access rate of 2.42 per cent. With ISAs the average maturity rate over the same period is 4.46 per cent, with the average ISA easy access rate currently at 2.70 per cent.
Because some providers automatically move fixed-term accounts into variable easy access ones when they mature, people could potentially see their interest rate significantly drop if they leave their savings as they are.
Alex Sitaras, head of savings and partnerships at the building society, said: “Too many savers are missing out on money simply by standing still, letting their savings sit in accounts with low interest rates, especially when their fixed-rate deals come to an end. When a fixed-rate account matures, many providers automatically switch customers to a default variable rate, which is often significantly lower.
The difference between 4.5 per cent and 2.5 per cent might not sound dramatic, but for the average saver, it could mean losing hundreds of pounds a year. These findings show just how vital it is to protect savers from rate shocks at the end of their term.
We believe in fairness - so where possible, we aim to transfer the majority of our customers onto another fixed-rate option at the end of the fixed rate period.
However, when the fixed term comes to an end, we are mindful that this may be a lower rate than they started with, so we encourage all our members to come and have a conversation with us to see what option is right for them.It is crucial to stay alert when your fixed-rate savings mature, better rates options are worth shopping around for and can make a real difference to your savings.”
It also emerged nearly one in 10 (nine per cent) never check the interest rates on their savings accounts. Additionally, 18 per cent said they lack awareness of better rates available. In fact, 16 per cent haven’t opened a new savings account in the last five years, with 22 per cent believing it’s too much effort to switch. But 19 per cent are concerned they might make the wrong choice if they did.
However, 62 per cent have opened an account only to see the interest rate drop after a period – leaving 46 per cent disappointed and 40 per cent annoyed.
The research also found that 43 per cent currently hold a fixed-rate savings account which hasn’t yet matured, and 41 per cent have had their fixed-rate deal come to an end.
One in three (34 per cent) don’t understand the term “account maturity” in relation to fixed savings with 17 per cent admitting they don’t understand what happens when an account reaches maturity.
When the maturity did happen, 59 per cent moved their money to a new account, either with the same provider (31 per cent) or a different one (28 per cent). But 10 per cent left the money where it was, according to research carried out by OnePoll.
Of those who do move their money, 62 per cent choose the provider offering the highest rate, while 35 per cent prioritise access to their funds.
Almost two-thirds (63 per cent) said they would be likely to seek financial advice if they knew their savings rate was reducing. The areas they were most keen to receive guidance on were finding the best savings rates (54 per cent) and learning how to make the most of their money (49 per cent).
Alex Sitaras from Skipton Building Society, added: “Far too often, savings accounts that began with competitive interest rates end up quietly drifting onto low variable rates and many savers don’t even realise it. That means they could be missing out on the opportunity to earn more from their money.
While it’s encouraging to see some people actively managing their savings, not everyone feels confident navigating their options. That’s why guidance matters - and we why offer a free money advice service to help people plan ahead and make smarter decisions about their finances.
But for those with savings of £20,000 or more, moving money into a pension or investment could be a better long-term option, provided they are happy to take some risk with their money. So being able to also provide face-to-face regulated financial advice on the high street, can present longer-term solutions like pensions or investments, which can offer the chance for stronger returns and greater financial security.”
