That's according to a survey of 2,000 people by Opinium for Hargreaves Lansdown, which also found a third of savers haven’t switched for at least five years and more than a quarter have never switched.
Separate research by Shawbrook Bank also found that nearly a quarter of savers don’t even know what interest rate they are currently getting on their savings accounts.
Which? reveals the cost of savings inertia and offers tips on how to make the most of your savings.
What switching inertia could cost you
Savings rates have skyrocketed, hitting highs in 2023 not seen for 15 years. The average rate for an easy access account has risen from 1.16% AER on 1 November 2022 to 3.18% this month. It's a similar story for fixed-rate accounts, with the average rate on a one-year product increasing from 2.39% AER in November 2021 to 5.36% today.
So failing to switch is potentially costing savers a lot of money in lost interest.
For example, someone opening an easy-access account that pays today's average rate, on 1 November 2023, with a deposit of £10,000, will earn £206 more over the course of 12 months compared to this time last year - and £308 extra in a one-year fixed-rate account.
Find out more:Why aren't people switching?
Research by Hargreaves Lansdown research found that when asked why they hadn't switched savings account, more than a quarter said they believed they already had the best rate. Another quarter said it was because they trusted their existing bank.
Worryingly, 17% believed switching was too much hassle, 16% thought interest rates are too low to bother and 11% simply can’t be bothered.
Other reasons include waiting for rates to rise further (9%), not having the time to switch (7%) and worrying something will go wrong (6%).
Six tips for savings success
If you haven't switched for a long time, then one ‘strategy’ we would recommend you avoid is the ‘do nothing’ approach. In the time you're sitting on your hands, any cash held in a low to no-interest savings account is losing value as it won't be keeping up with inflation, which stood at 6.7% in September.
So what is the best way to make the most of your savings? Here are our top tips:
1. Shop around for the best rates
Competition among providers for savers is fierce, so it's vital you shop around for the best rate.
The current top rate for a one-year fix is 6.05% AER, offered by Union Bank of India (UK) Ltd, while the best rate for an easy-access account is 5.2% with Beehive Money.
But top-rate deals don't hang around for long, so savers should act quickly.
Moneyfacts data also shows average rates on one-year bonds fell in November, from a high of 5.42% AER last month. That's partly down to the Bank of England's decision to pause the base rate at 5.25% which has led to 'a cooling' in the rise of top savings rates.
However, rates on easy-access accounts are still going up and because many of these products don't restrict the number of withdrawals or issue penalties for closing an account, it's hassle-free to move your money when you spot a better rate elsewhere.
Find out more:2. Don't leave savings dormant
It’s all too easy to let cash accounts plod along with little effort. But neglecting your nest egg means you're missing out on higher interest rates elsewhere.
Remember, rates on fixed deposits can often drop dramatically when they mature, so make a note of when your term is due to end then switch as soon as possible.
3. Trace lost savings
Unfortunately, some savings accounts have been opened and forgotten entirely. Billions of pounds are lying unclaimed in lost and dormant accounts, but finding the money is relatively straightforward.
4. Open an Isa to reduce your tax bill
Inertia could also put your money at risk of being taxed if it is over the personal savings limit. Putting money in an Isa, for example, means you can save up to £20,000 a year tax-free.
To switch providers, contact the Isa provider you want to move to and fill out an Isa transfer form to move your account. If you withdraw the money without doing this, you will not be able to reinvest that part of your tax-free allowance again. You can transfer your savings to any type of Isa.
There are some rules you need to be aware of when transferring Isa funds. First of all, you can open a new account and transfer your current year's deposit, but you have to transfer over the whole thing.
If you have accounts with deposits from previous years, you can transfer all or part of those to a new account, just as long as no 'new' money is paid into more than one account. However, to get around this rule, some banks and building societies have started to offer 'combined Isas' or 'portfolio Isas', where you can open multiple cash Isa accounts in the same year under the same 'wrapper'.
Find out more:5. Don't be afraid of smaller banks
Some of the best rates are offered away from the high street by smaller challenger banks or Islamic banks.
You might feel nervous about investing in a provider you've never heard of but there are protections to ensure your money is safe.
Check the bank is covered by the Financial Services Compensation Scheme (FSCS), which protects balances of up to £85,000. So if the worst happens and the bank does go bust, you won't lose your hard-earned money as a result.
Find out more:6. Try the 'split and save' strategy
This involves keeping some flexible funds in an easy-access account and spreading the rest across several fixed-rate accounts that mature at different times.
For example, £10,000 could be spread evenly across one, two, three, four and five-year fixed-term savings accounts. After 12 months, the £2,000 saved in the one-year account would mature and could be moved into the best five-year account at the time. The following year, your two-year account would mature, and you could do the same. Eventually, you’d have several five-year fixed-term accounts on the go, with one maturing each year.
The split and save approach also means you won’t miss out entirely if rates continue to rise and your longer-term savings won’t suffer if rates unexpectedly drop.
You don’t have to split your money evenly across accounts either. Check the best rates on offer for different accounts (including easy access) and split your money based on what you feel comfortable with.
source https://www.which.co.uk/news/article/6-tips-for-making-the-most-of-your-savings-aeafc3q1bAWR