The Bank of England (BoE) chose to freeze the base interest rate at 4.75% in December, offering savers some respite. But with multiple rate cuts expected this year, now isn’t the time to leave your savings to thaw out.
Well over a third of savers have no plans to switch providers*, and they’re still overwhelmingly holding instant access accounts with high street behemoths.
This means they’re very likely missing out on better savings rates elsewhere.
But with a new year upon us, now is as good a time as any to see how you can get more from your savings.
Here are four tips to boost your savings in 2025.
This article isn’t personal advice. If you’re not sure an action is right for you, ask for advice.
Look past the high street
Two in five people stick with their current savings provider because they trust them. And, more than one in three choose to go with their high street bank when opening a new savings account*.
It’s a logical choice, because something that’s less familiar can take a while to get to grips with.
In recent years, new challenger banks have set up to disrupt the old hegemony of the high street and many are now offering more competitive rates to lure savers across.
As an example, let’s say you have £20,000 in cash savings. If you put this in a competitive easy-access online account with no withdrawal restrictions, paying 4.52% AER/gross for a year, it would leave you £634 better off than putting it in an instant access account with a big bank paying an average of 1.35% AER/gross. Figures as of 10 January 2025.
AER stands for Annual Equivalent Rate and show what the rate would be if interest was paid and compounded once a year. It helps you compare the rates on different savings products.
Gross is the rate without any tax removed. Interest is paid gross. You are responsible for paying any tax due on interest that exceeds your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change
The returns in this example assume rates and your savings balance don’t change for 12 months, but in reality rates can go up or down and you take your savings out when you want to. Bear in mind with easy access you can normally access your savings in one working day, but with high street banks withdrawals are immediate.
And the good news is that all banks, new and old, must jump through all sorts of strict hoops before they’re granted a banking licence in the UK.
They also have the same guarantees in place, so the first £85,000 you have deposited is protected by the Financial Services Compensation Scheme (FSCS) if it goes bust. Although, its always worth checking if your provider is covered by the scheme as there are exceptions.
It means there are plenty of reasons to trust banking newcomers.
Switching is worth the plunge
Almost one in five* say rates are so low it’s not worth switching. This could be a hangover from before the pandemic, when rates were so much lower. It could be why this rises to nearly a quarter among savers who admit they don’t know what rate they’re getting.
There will be some people who see that the BoE has cut rates, and assume the days of decent savings deals are done and dusted.
However, this is far from the case. That’s because despite pulling back from the peak, you can still get up to 4.52% AER on easy-access savings and 4.68% AER on products fixed for a year with Active Savings.
This leaves savers paying a steep price for their reluctance to switch. A move could triple their rate for variable rate products, from an average with a big high street bank of 1.35% AER to as much as 4.52% AER.
This makes the cold plunge much more palatable.
Don't wait around for a better deal
Almost one in ten said they were waiting for rates to go higher. This figure doubled among those aged 18-34. With a cost-of-living crisis, younger people likely have less disposable income to save each month and trying to wait and see if they can get a higher return.
But rate rises from here look distinctly unlikely.
The most competitive deals have been gradually dropping toward the end of 2024, and with more BoE rate cuts in the cards in 2025, we can expect them to drop further.
That’s not to say there aren’t still some great deals on the market, but savers will need to act fast while they stick around – so waiting is unlikely to work in your favour.
Cut the hassle and consider a savings platform
Apathy has a cost and big high street banks are cashing in on our fear of faff.
16% say moving would be too much hassle. This rises to 20% of women and 26% of those aged 35-54, who are often juggling work and caring responsibilities and have an awful lot of demands for their time.
In many cases, it’s the imagined work that comes with switching that puts them off – 11% say they probably should switch but can’t be bothered. This rises to 17% among those aged 18-34. Meanwhile, 10% say they don’t have time – including 12% of men and 18% of younger people.
However, shopping around and switching has never been easier.
An online savings platform, like Active Savings, means you can switch between different products from different banks without having to fill in any forms or prove your identity for each one.
Active Savings brings some of the best rates on the market from over 20 banking partners all in one place and through one easy-to-use online account.
It also offers long and short-term fixed rates, as well as easy-access products.
And, currently you could get cashback when you open a new account. Terms apply.
Just remember, rates are added and withdrawn at any time. Fixed rates also don’t normally let you take out your savings until the term ends.
If you haven’t already, it’s also a good idea to make sure you’ve already built up an emergency savings pot you can get to quickly before fixing other savings.
*Figures in this article are from a survey of 2,000 people by Opinium for HL in September 2024
This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.
The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).