Millions of savings accounts due to mature in next two months

When savings rates jumped following the Bank of England increasing the base rate in November ‘22, savers rushed to take advantage of the higher rates; this rush of savers has created a new second ISA season

 
Data from CACI*, analysed by Shawbrook shows that as many as 2.2 million accounts, including over 1.2m ISAs and more than 900,000 non-ISAs are due to mature before the end of the year. For those with these accounts, holding a total of £73bn in savings, time is running out to secure a new high-paying fix.

Savers coming close to the end of their fixed period should be looking at what rate they’ll be getting in the months ahead, and compare against other providers on the market, to ensure they get the most for their hard earned savings.

ISAs are a tax wrapper, enabling savers to deposit up to £20,000 each tax year and earn interest tax-free. Outside of ISAs savers are entitled to a tax-free allowance of £1,000 for a basic rate taxpayer, £500 for a higher rate taxpayer and nothing for an additional rate taxpayer. However, with tax thresholds remaining frozen, many might find they would be better off saving into an ISA than a traditional savings account.

Currently a higher rate taxpayer who saves £10,000 in a leading one-year fixed account (4.85% AER) would put them over the personal savings allowance. Similarly, for a basic rate taxpayer, £20,000 in the same account could see them go over the threshold.
 
Adam Thrower, Head of Savings at Shawbrook:
 
“The mini-budget of 2022 exacerbated the rising interest rate crisis, prompting a rush among savers to lock in higher rates with new one- and two-year fixed accounts. Many withdrew from their existing ISA fixes early to capitalise on the more competitive rates. This surge gave rise to what many now refer to as a second ISA season, with a marked increase in fixed-term accounts maturing each autumn over the past two years.”
 
To help those approaching the second ISA season and wanting to choose the right account, Adam Thrower, Head of Savings at Shawbrook has the following top tips:
 

1. Consider longer term fixes

While there are one-year bonds and easy-access accounts offering slightly higher headline rates today, there are some distinct benefits of locking into longer-term accounts. Locking in today’s advantageous rates guarantees a predictable income stream for years to come, regardless of future rate cuts. This can be especially helpful for those approaching retirement, or those who’ve got enough cash set aside to deal with emergency costs.

But the window is closing fast to make the most of this. With one-third of over 55s planning to make the most of their savings, when they stop working** choosing a high interest rate over a long time could result in substantial savings.

2. Accreditation is key

Before moving any money to a bank or savings account, you should check that it is protected. Under the Financial Services Compensation Scheme (FSCS) you are covered if a bank or building society fails. If this happens then you can claim up to £85,000 per person back. You can check this on the FSCS website by entering the bank’s name to ensure your money is safeguarded.

3. Don’t be put off by a lack of high street presence

Many of the leading savings providers do not have a high street presence and so, by limiting yourself to a ‘big name’ or only a bank with high street branches, you’re limiting your potential earnings. If the bank you’re interested in is protected by the FSCS and is offering a rate that is much better than your current rate, then make the switch.

4. ISA or non-ISA

Another key consideration is tax. Many providers offer individual savings accounts (ISAs) which you can use to save up to £20,000 tax free per tax year. As interest rates have continued to rise, many might find themselves nearing the threshold for taxation on their interest income. Worryingly data from CACI* found the number of accounts at risk of a shock tax bill doubled in just a year to over six million, highlighting why savers should consider the benefits of an ISA to reduce tax burdens. For higher earners, using ISAs is even more important due to the reduced PSA of just £500 for higher rate taxpayers and no PSA at all for additional rate taxpayers.

5. Use the right account for you

 
Every saver is different. Some might have a large amount of savings; others might want to use an account for a rainy-day fund. Whatever it is you are saving for, or however much you are saving, choosing the right account is key. For those building a rainy-day fund, an easy access or notice account might be more suitable, as you can access your money without paying any early withdrawal fees.

Research by Shawbrook** found that 41% of people over 55 plan to use their savings for retirement. However, a focus on short-term, easy-access accounts might be costing them a valuable opportunity. Utilising fixed rate accounts, and potentially opting for interest to be paid monthly you could have a steady income stream from your savings. These accounts will require you to lock your money away for a fixed period, but could provide better sustained rates in return. There are also no rules about how many non-ISA accounts you have, so you could also consider using a mixture of accounts to best fit your needs.

**CACI calculations based on data from 40 contributing members of our monthly Current Account and Savings Database (CSDB) as at end of July 2024.

**The research was conducted by Censuswide with 2,011 UK consumers aged 55-68 between 27/06/24-3/07/24. Censuswide abide by and employ members of

the Market Research Society which is based on the ESOMAR principles and are members of The British Polling Council.