Britons with savings in major banks could be missing out on hundreds of pounds in interest each year. Financial experts highlight that moving funds to high-yield cash ISAs could significantly boost returns, with some accounts now offering over 5% interest.
With inflation affecting household budgets, finding the best savings accounts has become increasingly important. Many savers stick with their traditional banks, often earning low interest rates.
However, newer platforms such as Plum and Trading 212 offer competitive rates, potentially earning savers up to £505 annually on a £10,000 deposit.
Higher Interest Rates Outside Traditional Banks
According to MoneySavingExpert (MSE), high street banks often offer savings accounts with lower interest rates compared to digital platforms.
Plum, a financial services app, currently provides a cash ISA with a 5.05% interest rate, allowing savers to earn tax-free interest. The account requires a minimum deposit of £100 and allows up to £20,000 per tax year to be stored.
The key advantage of cash ISAs is their tax-free nature. In a standard savings account, interest earned above the Personal Savings Allowance is subject to tax. Basic rate taxpayers can earn up to £1,000 in interest tax-free, while higher rate taxpayers have a £500 limit.
Cash ISAs, however, do not count towards this allowance, making them an attractive option for those with significant savings.
MSE explains that Plum’s ISA allows only three penalty-free withdrawals per year, making it suitable for those who do not need frequent access to their funds. Interest is paid monthly, helping savers accumulate returns faster.
How Much Can Savers Earn?
A saver depositing £10,000 into Plum’s 5.05% cash ISA would earn approximately £505 in interest over 12 months. For those who can deposit the maximum £20,000, the return doubles to around £1,010 annually.
Trading 212, another online savings provider, offers a similar deal with a 5.03% interest rate. Their ISA requires a minimum deposit of £1, making it accessible to more savers. Like Plum, Trading 212’s interest is paid monthly, ensuring steady returns.
Experts suggest that millions of UK savers miss out on extra earnings by keeping their money in accounts with low interest rates. Moving funds to high-yield ISAs could provide a straightforward way to increase returns without risk.
According to financial analysts, comparing available savings options is essential. Interest rates fluctuate, and newer financial platforms often offer more competitive rates than traditional banks.
