A study from Which? has found that UK savers are missing out on as much as £13 billion in interest every year, by failing to switch their savings out of dead-end accounts and cash ISAs.
Some 41% of accounts are paying 0.5% a year or less, leaving savers losing a large chunk of their savings after inflation. And switching isn't quite the headache you may think.
Losing moneyThe study found that not only are a big chunk of accounts paying less than 0.5%, but one in five are paying 0.1% or less. If you had £1,000 in an account like this for a year, that could mean you earn interest of just £1. Given that inflation is running at 3.6% it means that money in these accounts is becoming less and less valuable every day.
As a result, Which? found that consumers are missing out on £13 billion a year in potential interest, which is an increase of half a billion pounds since October 2010. Worryingly it also found that when the return on a savings account drops, savers are likely just to put up with smaller returns. It says that 16% of people have had their main savings account for over 10 years, and a further 20% have had the same account for over 5 years - which means many are likely to have fallen onto uncompetitive rates.
Only 18% have held their main savings account for less than a year, which means that less than one in five savers are putting in the legwork to switch accounts regularly and make sure they are on the best deal possible.
What can you do?In the long run, Which? says it wants to see a regulator with more teeth, and that the new Financial Conduct Authority needs to be able to stand up to banks to demand better savings deals.
But for now, it is urging savers to switch to get a better deal. Which? chief executive, Peter Vicary-Smith, says: "Banks and building societies have got away with paying miserable interest on people's hard-earned savings for too long. Our research has exposed just how widespread this practice is. The message to savers is simple: if your money is in one of these low-interest accounts, you should switch now."
The good news is that switching isn't tricky. There are plenty of comparison sites allowing you to compare the best deals, and many will allow you to apply direct. Even cash ISAs, which in the past have been more cumbersome to switch, are cleaning up their act.
The Office of Fair Trading has found that 93% of cash ISA switches are completed within 15 days and if delays do occur, providers of cash ISAs are following new industry guidelines that require the acquiring provider to backdate interest either to day 16 of the transfer process, or to the date on the cheque - whichever is earlier.
The bad newsThe bad news, however, is that according to ThisIsMoney, many of the most competitive cash ISAs don't allow transfers in from old ISAs. It means that if you have money languishing in a poor ISA, you cannot transfer it into three of the five of the current best-buys for instant-access. You can't just cash in an old ISA and start another one either, or you will lose the ISA allowance for that year.
There are, however, some top rates for every kind of saver that allow transfers in. The Santander Direct ISA 9, for example, allows transfers and pays 3.3% including a bonus, while the Nationwide Online ISA will allow you to transfer in and get a rate of 3.1% including the bonus.
So it's worth doing the legwork, tracking down the accounts offering decent returns for transfers, and switching your money as soon as you can.