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Seeking comment: £1.2 trillion of savings earning just 1.2% interest

Journalist: Aaliyah Ahmed, The Times

ended 28. August 2026

I’m looking for savings, banking and personal finance experts to comment on analysis by investment platform Lightyear suggesting that £1.2 trillion of UK household deposits is sitting in easy-access accounts earning an average of 1.2% interest.

The figure represents around 62% of household deposits, while the Bank Rate is currently 3.75%.

I’m interested in why such a large proportion of household savings remains in low-paying accounts, whether savers are missing out by failing to switch, and why banks do not pass on the Bank Rate more fully to depositors.

I’d also like experts to comment on what savers earning around 1.2% should consider doing, whether easy-access accounts can still be appropriate despite their lower rates, and the risks and benefits of alternatives such as money-market funds.

(These figures are exclusive to The Times)

7 responses from the Newspage community

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Anita Wright
Chartered Financial Planner at Ribble Wealth Management
15 years of near zero rates taught savers a lesson they never unlearned that checking your rate was pointless. That habit outlived the conditions that created it. People aren't lazy. They're conditioned. And an account you never look at can never disappoint you. That £1.2trn of dozy money isn't a bug in the banking system, it's the business model. Sticky, unmotivated deposits are cheap funding, and banks rather like them. Fast money runs. Slow money doesn't. So savers earning 1.2% aren't just losing out for staying loyal. They are quietly paying for a safer banking system, and most of them have no idea they're doing it. Keep a few months' spending in easy access. That money is there as insurance for emergencies and is not to make you rich. Then move the rest somewhere that actually pays.
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Philly Ponniah
Chartered Wealth Manager and Financial Coach at Philly Financial
The biggest enemy of savers is often inertia, not a lack of choice. People are busy, moving money feels like admin, and many assume their bank will automatically give them a competitive rate when it often won’t. Easy access accounts are good for emergency funds but it does not have to mean accepting a poor rate. Money-market funds can offer competitive returns and flexibility, but they are investments rather than bank deposits. Returns can change, capital is not guaranteed in the same way as cash, and savers should understand the different protections before moving money. Banks know a large proportion of customers simply will not switch. That lack of competition from existing customers gives them little incentive to pass higher rates on in full.
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Graham Nicoll
Financial Planner, Chartered FCSI at NCL Wealth Partners
Consumer apathy is not unique to savings. We see the same behaviour with energy broadband, insurance and more. People stick with what they know because switching feels like a hassle or confusing.

Banks and building societies benefit from exactly this inertia. If customers accept 1.2% (or less) there is little commercial incentive to pay more or to encourage consumers to shift their money into better paying accounts. Savers need to ask whether cash is the right home at all. Keeping a suitable emergency fund in cash is important, typically 3-6 months expenditure is ideal. For longer term goals, consider whether investing gives a better chance of beating inflation and supporting your longer term lifestyle goals.

Some actions to consider: ensure you are using your ISA allowance (cash or stockers & shares), considering investing cash no needed and if you want to keep this in cash consider notice accounts or fixed term deposits to get better interest rates.
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Harvey Dhillon
Founder & CEO at Zmartly
Savers in low-paying accounts are missing out, and switching is the right move. Money can sit in one of those accounts without anyone choosing it, and moving it is the job nobody puts a date on. The gain is oversold, though, because tax can take a slice of it. How much of your interest is tax free depends on your other income: what you draw from wages or a pension can eat into what's sheltered. The savings allowance on top is £1,000 at most. The extra interest from switching counts in the income your allowance is worked out from, so the move itself can cut your own allowance. Money market funds are an investment call I'm not regulated to make. Easy access still earns its place for money you might really need in the next few months, because you can't lock it away. The rest belongs in a cash ISA, up to the yearly limit, where the interest isn't taxable income and can't cut your allowance.
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Paul Denley
CEO at Oakham Wealth Management
£1.2 trillion sitting in accounts paying around 1.2% shows how expensive inertia can be. With Bank Rate at 3.75%, many savers are paying a high price for convenience and familiarity. Banks benefit from customers who do not shop around. These deposits are a valuable source of cheap funding, so there is little incentive to pass higher rates on fully to existing savers. Easy access cash is important for emergencies and short term spending, but easy access should not mean accepting a poor rate. Savers should shop around, consider Cash ISAs and keep deposits within FSCS limits. Money market funds can offer yields closer to prevailing interest rates. Capital is not guaranteed and FSCS deposit protection does not apply, but exposure is typically diversified across a range of high-quality institutions rather than concentrated with one bank. The broader message is simple: when it comes to savings, loyalty and laziness can be an expensive combination.
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Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
This doesn't surprise me at all. Cash feels convenient but it needs to be worked to get the best returns. It feels safe because the number only goes up but that ignores inflation which is slowly eating your savings. I think it highlights the fear that lots of people have of investing and so it's easy default to just building it up in a current account or defaulting to whatever easy access account their bank offers.
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Holly Mackay
CEO and Founder at Boring Money
Apathy can be banks’ biggest ally. A lack of engagement coupled with fear and uncertainty about investing alternatives all contribute to the stockpile of cash in pathetic accounts, earning a paltry amount.

Savers should think about their savings as three pots, not just one. Short, med-term and long-term. Cash is always best for the short-term but top easy access accounts today are paying ~4% not 1%!

For long-term savings stocks and shares will almost always do better. The average high-risk ready-made stocks and shares ISA has returned 9.75%/y after fees over the last 5y. Using this rate, if we consider someone saving for a child, if they had saved £2kpa into a stocks & shares ISA for the last 18y, this would have turned this into £97.6k. A cash JISA paying the full BoE interest rate would have turned into £42.1k. Markets have been v strong over the last 5 years and returns have been very high. But we need to consider shares for long-term saving, not sit in cash at limp bank rates.