UK households are being urged by financial experts to make a simple change to their savings accounts that could lead to an extra £250 in interest over the course of the year. According to a report by Birmingham Mail, many customers of Nationwide, Lloyds, NatWest, and Santander are missing out on substantial earnings by keeping their savings in accounts offering poor rates of return. These rates, often below 3%, could be holding back potential earnings, especially as more competitive options are available in the market.
Simple Savings Switches Can Unlock £250 Extra
Experts are recommending that customers move their money from savings accounts with low interest to accounts offering higher rates, such as those with 5% AER. For example, placing £5,000 into a 5% AER account would result in £250 earned in interest over the course of a year. This simple change could dramatically boost the bank balances of millions of savers who may not be aware of more lucrative options.
Fiona Peake, a personal finance expert at Ocean Finance, emphasized the importance of starting early with savings. She said:
“Whether you’re saving £50 or £5,000, the key is to start.”
She added that investing early is the best way to maximize returns, as it allows your money to grow and be protected from taxes, especially in accounts such as Cash ISAs.
Tax-Free Savings with Cash ISAs
For savers who are still using standard savings accounts with low interest rates, Fiona Peake recommends switching to a Cash ISA. She explained:
“If you’re still using a standard savings account paying low interest, switching that money into a Cash ISA could protect your returns from tax, especially if you’re close to or over your Personal Savings Allowance.”
She highlighted that the tax advantages of ISAs make them a wise choice for anyone looking to maximize their savings without incurring tax charges.
But it’s important for savers to keep track of their contributions across different types of ISAs to avoid accidentally exceeding the annual £20,000 limit for total ISA contributions. Peake further advised:
“Keeping track of ISA contributions across different accounts can be tricky, but it’s important you don’t accidentally exceed your £20,000 limit or you’ll face a fine.”
She also reminded those using Lifetime ISAs that if they contribute £4,000 to that account, they will only have £16,000 left to contribute to other ISAs for the year.
Choosing the Right ISA for Your Goals
There are several types of ISAs available, each catering to different financial goals. Peake explained:
“There are Cash ISAs, Stocks & Shares ISAs, Lifetime ISAs, and even Innovative Finance ISAs.”
She went on to explain that each type has distinct benefits depending on whether you are saving, investing, or saving for a home purchase. For those looking to buy a home, a Lifetime ISA could be the best option, while those looking to invest may find Stocks & Shares ISAs more suitable.
It’s essential to assess what suits your personal financial goals and to stay informed about any changes to ISA rules and limits, as well as available interest rates.
