Savers are set to miss out on millions in returns after an epic £75.5 billion savings haul in lockdown, according to a new report by Atom bank.
On average Brits saved £1,974 each in lockdown, equating to £75.5bn across the UK, yet at least half of this is reported to be sitting in a savings account, likely offering minimal returns. Millennials saved the most out of all reported age groups – averaging at £2,200 each.
In total 73% of people have been using lockdown as an opportunity to save and just 8% have spent more than usual during lockdown, Of those that have been saving, half (50%) said they’ve been putting it in an instant savings account so that they can access it easily when they need it.
But with multiple rate cuts from the Bank of England leaving interest rates pitifully low, savers are set to pocket just £1.94 each in interest. After the latest rate cut, the current average interest rate on savings accounts across the big six banks stands at just 0.01%.
The situation is only set to worsen for savers as 82% of people say they will continue their new found saving habits, despite the little reward. Negative interest rates are also on the horizon, which if implemented, could see bank rates fall further and even result in banks charging people for holding money.
It comes as Atom launches a new savings account with an interest rate of 0.75% – one that is 75 times better than the Big 6, with no restrictions on withdrawals and no minimum deposit required at opening. By way of comparison, for the amount each person saved on average during lockdown (£1,974), they would have pocketed £13.81 in interest each if their money had been sitting in Atom’s new Instant Saver – £12 more than if they had stashed their money with one of the big six.
Taking customers for granted
The majority of people (62%) view savings accounts as a place to safeguard money so they don’t overspend, whereas just 21% think they are a genuine investment opportunity, or a place to grow their money. As a result, banks have been getting away with offering incredibly low rates and giving little back in return for their customer’s hard earned cash. What’s more, two in five (42%) could not confidently say what the interest rate is on their savings account, meaning many are left unaware of how their money is or (more likely) isn’t performing.
Just over 1 in 2 (55%) also said they believed high-street banks are prepared to take advantage of their customers, by offering little in returns and enforcing high – and growing – fees and charges. Lloyds, Halifax and Bank of Scotland recently upped the charge on their overdrafts and customers with a poor credit rating could be charged as much as 49.9%, which was initially due to be implemented in April but was delayed due to the pandemic.
When it comes to interest rates offered by banks, 1 in 2 people (46%) said they would describe the state of interest rates as bad and that they couldn’t generate any additional money. Over 1 in 10 (13%) even said terrible, and that they stood to lose money.
Recent figures from the Bank of England also revealed how more than 1 in 10 of us (13%) even stockpiled bank notes at home during the pandemic, showing how people would rather keep cash at home than in a bank.
Opportunities to save
Of those that have been saving more in lockdown, two thirds (62%) have saved money by staying at home and shopping less.
60% also saved due to restaurants and pubs being closed and a third (35%) saved from not commuting to and from work. One in three (30%) also saved money by making their own lunches.
Lockdown has also caused people to change their food shopping habits with 35% of people reporting a change, for example buying in bigger or smaller batches.
Looking ahead, 82% say they are likely to continue saving, and as restrictions tighten across the UK we could even see this figure increase.
Financial confidence about the future
Despite the pandemic, people remain largely confident about both their short and long-term financial futures. Just under half (49%) report feeling confident about money in the short-term, with almost one in five (16%) saying they are ‘very’ confident.
When it comes to their long-term financial future, well over two fifths (43%) say they are confident, with well over a tenth (14%) ‘very’ confident.
Millennials are the most likely out of any age group to feel confident about both their short-term financial future (62%) and long-term financial future (55%).
Mark Mullen, CEO of Atom bank, commented: “Banks have been taking customers for granted for years. Lockdown has simply brought this into sharper focus. Brits have saved millions with little return for their efforts, while some of the UK’s biggest banks even pressed ahead with upping overdraft rates to an absurd 40% flat fee.
“For too long it’s been the norm to offer customers shockingly low interest rates. People are even stockpiling cash in their homes rather than in a bank account, which shows just how little they think they’ll gain by trusting the big six with their money. Atom is here to remind us all that when you save, your money is used by banks to allow someone else to borrow. The borrower should get a great deal from the bank – whether to buy their home or sustain and grow their business – but so should the saver. It’s time to shine a light on the behaviour of big banks and to do the right thing by our customers.
“People need to act now and take control of their finances. Our new Instant Saver has a rate that’s 75 times higher than the UK’s biggest banks, and with no short-term bonus rate to lure you in, no limits on withdrawals and no minimum amount required at opening, it offers people much-needed flexibility while their cash works harder for them.
“We’ve built a bank that delivers award-winning customer service – one that’s determined to push the market in the favour of customers.”