Move savings regularly and earn 298x more interest

02 May 2012 15:56:01

Change your savings account regularly to secure the best deals.

If your savings have been languishing in a low-interest account for the past couple of years, it may be time to start looking for a new home for them, as research suggests the returns on many new accounts are starting to improve. The historically low Bank of England base rate has harmed many of our savings balances for more than three years, but the latest figures from independent research firm Defaqto indicate that the future is looking brighter.

Savings rates on the up
You may want to start your search for a new savings account by looking at instant or easy-access accounts, as Defaqto's research shows that the average savings rate on these has risen to its highest level in three years. Currently, the average interest rate if you pay £1,000 into an instant or easy-access savings account is 1.25% gross AER. This is a much more attractive rate than those available between March and December 2009, when the average interest rate ranged from 0.72% to 0.92%, and is the highest average rate since then.

Boost earnings by switching regularly
Experts say we should review our savings on a regular basis and the benefits of doing this are highlighted by the latest research. In fact, Defaqto says that someone who moved £1,000 every 12 months for the past three years in order to take advantage of the best introductory bonuses could have earned over 298 times more interest than someone who left the same amount of money in the lowest-paying account during that time - £71.73 net interest compared with just 24p.

Banking specialist David Black says: "This analysis really illustrates the benefits of reviewing your savings account on a regular basis. There are significant benefits in switching your account every year to take advantage of successive accounts offering introductory bonuses."

One final note of caution...
Be aware that the accounts with the highest interest rates tend to place restrictions on withdrawals or impose penalties if you do not leave your money alone for a set period of time. Make sure that you choose an instant or easy-access savings account if you want your funds to be within easy reach, even though the rate of return is likely to be less impressive.

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