Financial experts urge savers to take easy step to make £120: "Bank loyalty is a recipe for disaster"

FINANCIAL experts have urged savers to take an easy step to make £120 as they warn “bank loyalty is a recipe for disaster”.

Falling bond rates and sticky inflation mean savers who stay loyal risk missing out on the most competitive returns, Moneyfactscompare.co.uk has revealed.

Last year, the average savings rate was 3.75% while the top rate paid closer to 5%, meaning savers could have missed out on £120, Moneyfacts said.

Moneyfacts survey data shows that one in four people are missing out on real returns because they have never switched savings accounts.

Caitlyn Eastell, Spokesperson at Moneyfactscompare.co.uk, said: “Loyalty is not always rewarded, and savers could be missing out on a significant cash bonus just by being more aware about where they put their money."

She added: "Last year the Moneyfacts Average Savings Rate was 3.75% while the top rate paid closer to 5%, meaning savers could have missed out on £120. Due to lower rates, in today’s terms that loss could be even bigger. 

“Savers should keep an open mind when choosing a provider as challenger banks may be more generous with their offerings.” 

Antonia Medlicott, Founder & MD at Stonehouse-based Investing Insiders, said you may need to look further afield for the best deals.

She added: "Savers who are willing to shop around can get 4.5% on the top-paying Cash ISAs and savings accounts at the moment. But those are with brands that people will not be as familiar with: Plum, Moneybox, Cahoot, Oxbury and Chip.

"Contrast that with the 0.35% that one high street bank is currently paying on its everyday savings account, and you start to see that loyalty is sadly, very expensive. NatWest is bucking the trend with a 1-year fixed Cash ISA that's currently paying 4.20% but it's rare that we see a big bank in our top tables. 

“If you're comfortable using online services, then you can always find a good rate. If you want to open a savings account by walking into a physical bank branch, then you might not be so lucky.”

Scott Gallacher, Director at Leicester-based Rowley Turton, said one of his clients was losing out on £20,000 a year.

He continued: "Bank loyalty is a recipe for disaster — it leaves savers wide open to being ripped off. I recently met a client whose loyalty was costing him around £20,000 a year. His bank was paying 1.5% less on his savings than he could get elsewhere and charging about 1% more on his investments. 

“My advice? Don’t assume your bank is giving you the best deal. Always shop around, review your savings and bonds regularly, and use comparison sites to check the top rates. Loyalty might feel comfortable, but with money it’s usually very expensive.”

Philly Ponniah, Chartered Wealth Manager and Financial Coach at Philly Financial, urged people to not be loyal to their bank.

She added: "Loyalty to a bank is rarely rewarded in savings. The smart approach is to be loyal to your money, not your provider. Rates shift quickly, so even a 0.2% gap compounds over time. 

“But don’t just chase numbers - step back and ask: what am I actually saving for? If it’s short-term goals like a holiday or new car, flexibility matters more than the last decimal point. For longer-term where you know you’ll need a certain amount, then a fixed term bond works but if it’s more than five years away you could consider investing and not losing the real value of cash.”

Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, agreed, adding: "Loyalty is one of the most expensive habits in personal finance. Banks count on customers suffering from financial inertia leaving their money where it is, even as rates fall and that’s why the ‘loyalty trap’ exists. 

“The gap between average and best-buy savings bonds can cost households hundreds of pounds a year in lost interest. With inflation still sticky, leaving cash languishing in below-market accounts isn’t safe, it’s locking in a real-terms loss. Savers need to shop around, use comparison sites, and not be afraid to move, because loyalty pays the bank, not the saver.”

Rob Mansfield, Independent Financial Advisor at Tonbridge-based Rootes Wealth Management, said inflation will eat away at your savings.

He continued: "You don't owe your bank any loyalty and so shopping around makes sense. It can be a lot of work if you have multiple accounts, so staying with your bank is often the most convenient option and the banks know it. 

“If you're going to hold a lot of cash, keep an eye on your rates otherwise it's at risk of being eaten away by inflation.”

Anita Wright, Chartered Financial Planner at Ribble Wealth Management, added: "When I look at the savings landscape through the lens of financial planning, what stands out is how much the environment has shifted and how savers really cannot afford to be passive. 

"Today, with inflation still stubbornly high and interest rates in decline, that loyalty is often costing people real money in lost returns. In today’s terms, given where rates have settled, the opportunity cost of not switching is even greater. From a financial planning perspective, the key is to recognise that cash is not a ‘set and forget’ asset class. 

"The whole point of holding cash is either liquidity – having money readily available for emergencies or near-term goals – or security, protecting capital in a low-risk way. But if the rate you are earning is below both inflation and what is readily available elsewhere in the market, then even that security is eroded in real terms. So my advice is clear: do not be loyal to an institution, be loyal to your money and your goals."