Billions of pounds languishing in low interest accounts as savings rates slashed

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last updated 1 May 2025

Half a trillion pounds are languishing in zero or low interest paying current and savings accounts.

More than 29 million adults in the UK (55% of the population) are holding a total of £526 billion in accounts that provide very little extra value to consumers, according to new data from Spring Savings, which is part of Paragon Bank.

Collectively, customers are estimated to miss out on around £20 billion in lost interest by leaving this cash where it is.

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Spring Savings says this low-interest epidemic is driven by uncompetitive savings accounts from high street lenders.

The average interest rate offered on easy access accounts by the big five high street banks – NatWest, Lloyds, Barclays, HSBC and Santander – in April 2025 was at just 1.25%.

This figure is far lower than the best savings accounts on the market at the moment. Chase’s Saver currently leads the pack, with the bank offering more than two million customers a 4.8% (variable) interest rate, which includes a 1.8% fixed boost for six months.

Atom Bank’s Instant Saver Reward easy access account also far outpaces the 1.25% average, paying interest of 4.75%.

Meanwhile, Spring Savings also revealed that more than three quarters of easy access savings accounts come with some restrictions such as bonus rates, stepped rates or withdrawal limits, they warned.

While leaving cash in accounts with low-paying interest rates means the money won't work as hard as it can, the problem worsens as inflation slowly erodes the value in real teams.

Inflation eased to 2.6% in March 2025, but the UK has been subject to high rates of inflation in recent years – hitting a 41-year high of 11.1% in October 2022. Inflation is still higher than the Bank of England’s 2% target.

Paragon Bank CEO Nigel Terrington said: “For too long, high street banks have taken advantage of customer loyalty – offering little to no interest on savings while making it unnecessarily difficult to access better alternatives.

“Many people leave their surplus cash in a savings account with their clearer, but these have some of the poorest rates available, costing consumers billions in lost interest, year after year.”

Billions of pounds are also stuck in zero or low-interest cash ISAs

The phenomenon of cash being stuck in zero or low paying interest accounts isn’t just the case for current accounts.

Spring Savings' research also revealed that more than £54 billion is withering in cash ISAs paying interest rates of 2% or lower, with the majority (96%) held in instant access options.

Some £52.4 billion of these savings balances are in easy access accounts while £1.7 billion is held in fixed-rate ISAs which pay no more than 2.0%.

The best cash ISA rate right now is the easy access Moneybox Cash ISA, paying 5.71% interest (including a 1.51% bonus rate for three months), while Plum’s Cash ISA pays 5.06% interest (including a 1.5% bonus rate for three months).

Derek Sprawling, managing director of savings at Paragon Bank, said these cash ISA savers can “easily” switch the money into a “better paying account” to make their money “work harder”. He added: “On average, these accounts contain over £7,000 and that money could be generating much better returns by switching.”

While he recognised savers are protecting their money from being taxed by keeping it an ISA wrapper, Sprawling said: “Many savers overestimate the effort involved in switching a cash ISA. I’d encourage anyone receiving under 2% to consider their options.”

MoneyWeek’s guide on “how to transfer an ISA” explores the process of moving ISA savings in more detail.

Daniel is a digital journalist at Moneyweek and enjoys writing about personal finance, economics, and politics. He previously worked at The Economist in their Audience team.

Daniel studied History at Emmanuel College, Cambridge and specialised in the history of political thought. In his free time, he likes reading, listening to music, and cooking overambitious meals.