UK savers are more than £ 1,000 better off than they were at the start of the pandemic

The typical UK saver is better off by £ 1,000 than before the pandemic, but is more likely to hide his money in an easy-to-access low-interest account.

The average savings balance fell from £ 11,141 in March 2020 to £ 12,145, according to CACI data analyzed by Paragon Bank.

Savings data, collected from more than 30 banks and building societies, shows total savings have increased 8.3% since the start of the pandemic, from £ 903 billion to £ 978 billion of pounds sterling.

Rainy Day Fund: Money in easy-access accounts accounts for 60.6% of the overall savings market, an increase of 17.4% since March 2020

But the British appear to be pouring their foreclosure savings into easy-to-access accounts rather than more lucrative fixed-rate deals.

The average easy-to-access balance has increased by £ 1,450 since the start of the pandemic, from £ 10,246 to £ 11,696.

The money in these accounts is collectively worth £ 593 billion, which means more than 60% of UK economies are hidden there.

The trend is believed to have been largely driven by the uncertainty caused by the pandemic.

As the name suggests, savers can withdraw their money from an easy-to-access account whenever they want, without penalty.

However, they pay much lower interest. The best buy easy-access rate is currently 0.65 percent, but by putting their savings in a fixed-rate account for just one year, a saver could earn more than double to 1.45 percent.

James Blower, founder of consultancy firm The Savings Guru, said: “We’re seeing more money in easy-to-access accounts – thanks in large part to Covid.

“First of all by people with additional savings due to blockages – savings on travel costs, vacations, the inability to go out, etc.

“These people don’t know what to do with their available money, so they leave easy access until they are.

UK savers are better off by over £ 1,000 than they were at the start of the pandemic

“Second, this trend has been caused by the uncertainty that Covid has created, which means people who can keep more buffer for the future in case there is more disruption.”

Another savings product that Britons seem to have flocked to during the pandemic are regular savings accounts, with total balances increasing by almost 38% from £ 11.8bn to £ 16.3bn sterling since the start of the Covid restrictions.

Regular savings accounts allow savers to save a set amount each month, but usually with a minimum or maximum limit on how much can be deposited each time.

For example, the market-leading offering offered by Cambridge Building Society pays 5% interest on its regular additional reward savings account, but limits monthly deposits to £ 250 with a maximum balance of £ 3,000.

Customers will also need to have another product with the construction company to be eligible.

Isas Instant Access Cash has also remained popular since the start of the pandemic, with the amount saved on those accounts rising from £ 176bn to £ 187bn.

However, as easy access offers have exploded, many savers seem to have left some room in the fixed rate savings market.

The fixed rate deals have seen a cash drain, with total savings in these accounts falling 21% from almost £ 98bn to almost £ 73bn since the start of the pandemic.

Isa fixed-term products, which also offer better interest to those who want to lock in their money for a set period of time, have followed a similar pattern.

The balance held in these fell from around £ 87bn in March 2020 to £ 78bn in July this year.

Despite the ease of access craze, industry experts suggest the trend may be reversing towards fixed rate deals now that rates have improved and the worst lockdowns appear to be behind us.

“We saw best buy easy access rates drop to 0.40% in March, with one-year fixes to just 0.56%,” Blower said.

“This has had very little incentive for savers to tie up their money.

“Now, this differential is 0.65% against 1.45%, so there is an attraction to lock for savers.

“As a result, what I see in the market is more money moving into fixed rate savings. One-year fixed rates were the most searched product on Savings Guru in September, and so far in October as well.

“I think this trend of returning money to fixed rates will continue, and we’ll also see more of these lock-in savings balances being spent – so I think the easy-access balances have probably hit their mark. culminating. “

Easy access compared to fixed rate offers

The best easy access and paid offer currently available is through the Family Building Society, paying 0.65%, although savers only have until November 5 to add money to this account.

The digital savings platform Chip also offers an even better rate of 0.70% through Allica Bank, although customers will need to sign up for the service and pay the membership fee of £ 1.50 per month to do so. to access.

This rate, offered exclusively to Chip customers and via this link via This is Money, comes with Financial Services Compensation Scheme protection of up to £ 85,000 per person and allows savers to deposit a maximum of £ 30,000 in the account.

Account type (minimum investment) 0% tax 20% tax 40% tax
Al Rayan Bank (£ 5,000 +) (3) 1.45 1.16 0.87
Investec (£ 5,000) 1.33 1.06 0.80
Kent Reliance (£ 1000 +) 1.33 1.06 0.80
Al Rayan Bank (£ 5,000 +) (3) 1.76 1.41 1.06
Gatehouse Bank (£ 1,000 +) (3) 1.60 1.28 0.96
Al Rayan Bank (£ 5,000 +) (3) 1.81 1.45 1.09
Gatehouse Bank (£ 1,000 +) (3) 1.78 1.42 1.07
Gatehouse Bank (£ 1,000 +) (3) 2.05 1.64 1.23
QIB (UK) (£ 1,000 +) (3) 2.00 1.60 1.20

You can find out if this might be right for you by reading our review of Chip’s Exclusive Offer here.

The savings platform, Raisin, also offers a welcome bonus of £ 50 to any new customer who places £ 10,000 or more in a savings account.

Although their best easy-to-access account pays 0.45%, the addition of the welcome bonus means someone who hides £ 10,000 could earn £ 95 in the first year – an effective return of 0.95%, higher at the rate of Chip.

Unlike Chip, Raisin doesn’t charge any account fees for its service, so saver returns won’t be eroded by monthly fees.

However, for savers willing to lock in their money for a year or more, the potential returns are higher.

The main one-year fixed rate transaction, through Al Rayan Bank, currently pays 1.45%, although savers need a minimum deposit of £ 5,000 to get started.

The Birmingham-based bank is Sharia-compliant, which means it cannot offer customers an interest guarantee. Instead, it delivers an expected rate of profit from the accounts.

UK savers are better off by over £ 1,000 than they were at the start of the pandemic

These types of accounts have become more common and often appear in Best Buy charts independently compiled by This is Money.

Al Rayan Bank also offers the best fixed rate offer over two and three years, paying 1.76% and 1.81% respectively.

Given the higher rates offered by fixed rate offerings, savers who feel comfortable with locking their money for a set period of time are encouraged to consider these accounts.

This is especially true given the expected hike in the Bank of England’s key rate early next year, which could lead to a further rate hike.

Derek Sprawling, Director of Savings at Paragon Bank, said: “Our advice to savers would be not to overlook fixed rates, especially now that providers are expecting an increased base rate.

The average UK savings balance now stands at £ 12,145.

The average UK savings balance now stands at £ 12,145.

“The market is looking to the future and the rates available in the best buy tables no longer reflect the current base rate.

“It is important for savers to make the most of competitive rates while they are available, as the market may remain volatile in the coming months.”

James Blower also thinks it’s worth repairing for a year to get a better return on your money.

However, he suggests not fixing for more than a year in case interest rates start to rise.

“I think savings rates are likely to be stable over the next few months, but everything else in the economy points to improving rates in 2022,” Blower said.

“My advice to savers is that fixed rates are attractive enough to be tied, compared to easy access, to those who can lock in their money, but don’t fix beyond a year.”

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