Millions of UK households are receiving a stark financial warning after research revealed vast sums are languishing in current accounts earning minimal or no interest.
The Scale of the Savings Shortfall
Analysis by Yorkshire Building Society indicates that more than 12 million current accounts in the UK are paying 1% or less in interest on balances exceeding £5,001. This situation means a significant portion of personal wealth is failing to work effectively for savers, missing out on potential growth that could alleviate budgetary pressures.
The issue is part of a broader trend of financial caution and strain. Research conducted by Opinium in November, compared with a previous survey from September 2024, shows households are tightening their belts. The average expected festive spend dropped to £596 this year from £774 in 2024. Furthermore, the proportion of people planning to spend over £1,000 plummeted to 15%, down from 51% the previous year.
A Nation Under Financial Stress
Tina Hughes, Director of Savings at Yorkshire Building Society, commented on the findings. "Christmas is usually a time of celebration, but this year many households are cutting back as budgets tighten," she said. "With household budgets under pressure and financial stress rising, it’s clear many are feeling the pinch."
The survey data supports this, revealing that more than half (55%) of people feel stressed about their finances. Nearly a quarter (24%) planned to use a credit card to cover festive costs, with a quarter of those borrowers not expecting to clear the debt for up to a year.
Hughes emphasised a key opportunity many are overlooking: "Yet millions are still missing out on easy wins – like earning interest on their savings. For many, that extra income could have easily covered the cost of Christmas."
The High Cost of Inaction
The problem extends far beyond individual accounts. Separate research from Spring Savings, a new app launched by Paragon Bank, paints an even starker national picture. It estimates a staggering £526 billion is sitting idle in current accounts earning no interest.
This inertia costs Britons dearly. The research suggests 29 million people miss out on approximately £20 billion annually in interest by not moving money to higher-paying accounts. One in three people reportedly has £5,000 sitting in their current account, while the average balance is £2,067.
Derek Sprawling of Paragon Bank criticised the status quo: "High street banks are offering little to no interest on savings while making it unnecessarily difficult to access better alternatives, resulting in the rise of 'current account coasters'."
The core issue often isn't a lack of options but a level of saver apathy. Paragon's research found that one in ten people admit they simply haven't gotten around to moving their money, while 11% have no specific reason for not seeking a better rate. Interestingly, just over 20% keep funds in their current account as an easily accessible rainy-day fund.
The potential reward for proactive savers is substantial. For example, £5,000 placed in a top easy-access savings account paying 4.76% could generate around £243 in interest. In contrast, the average current account balance of £2,067 would earn only about £175.56 in the same account, highlighting the significant gains being forgone by millions.
The collective message from this research is clear: with financial pressures mounting, reviewing where your money sits could be one of the simplest and most effective steps towards greater financial security.
