How to make sure your cash does not languish in a low-interest paying zombie savings account

14th May 2014


Consumers are missing out on £4.3 billion a year by letting their cash languish in low-interest savings accounts. But there are very simple ways to make sure this doesn’t happen to your money writes financial journalist Kara Gammell.

Thousands of savers have money sitting in so-called ‘zombie’ accounts, which are closed to new business and typically pay paltry interest rates. Yet, according to research from consumer group Which?, a third of people see little point in switching accounts due to the pitiful savings rates currently on offer. However, few savers are aware of just how little their banks are paying them.

“There are now more so-called zombie savings accounts than live accounts available on the market,” says Anna Bowes of rate-monitoring site,

“This means that more people are likely to have money languishing in one of these accounts – earning them just 0.50% or less in interest.”

Many of savers who snapped up a competitive account a year ago might be surprised to learn how little interest they are getting on their savings.

For instance, according to, savers who opened the Halifax’s Online Saver account in April last year may have been attracted by the rate of 1.3%. But one year on, these savers are getting just 0.2%. Similarly, those who opened the Post Office’s EasySaver in the same month will find the interest rate dropping from 1.35% to just 0.1%.

“Consumers need to do everything they can to help themselves maximise their money,” says Kevin Mountford, head of banking at

“If you have funds in an existing account and have held this for more than 12 months then the chances are you will be receiving a rate far lower than you can receive on the current leading products in the market.”

If this sounds like you, read on for four ways to make the most of your savings accounts.


“Sadly savers can’t rely on all providers to keep them informed at all times of the rate they are earning, and few will let them know if they could improve their rate,” says Ms Bowes.

The interest rate on savings accounts tends to fluctuate in line with the economy as a whole. Banks and building societies are also prone to cutting savings rates once enough new customers have signed up to an account.

Your bank or building society has to make you aware of any changes but does not have to contact you personally, or before the change, unless it results in a “disadvantageous change of a material nature”. If you have a branch-based account, they can do so just by a notice on their website, advertising in the branch and in selected newspapers.

“The majority of banks are not proactive when it comes to making sure you are on the best deal, so it pays to be on the ball and not let them get away with it,” says Mr Mountford.

So it is crucial to keep a constant eye on how much interest your account is paying and when any fixed rates or bonuses expire.

One way to stay on top of your interest rates is to use an online savings account monitor. Rate Tracker, for instance, is a free service that reminds you when your interest rate is set to fall. For details visit


Banks and building societies are always launching new savings accounts with competitive rates in order to attract new customers.

Using a comparison website is often the easiest way of finding the best savings deal. To get a complete list of the best-paying accounts from across all UK banks, ensure that select “all accounts” when doing your search rather than just those that pay commission to be promoted.

Compare accounts with sites such as, and


While securing a good interest rate is a top priority for most savers who are looking to switch accounts, make sure you read the terms and conditions carefully as many banks and building societies will have onerous caveats – particularly on so-called easy-access accounts.

These restrictions can include penalties for exceeding the monthly deposit limit or stipulating the number of withdrawals permitted.

Mr Mountford warns that Isa holders must also be aware that if money is withdrawn from existing Isa account it will lose its tax-free status.

“Instead you need to follow the Isa transfer process which your new provider will help you with,” he says.

It’s also worth remembering that the limit on how much you can save in a cash Isa is due to increase to £15,000 on 1 July 2014.


If you have a considerable savings pot, it can often make sense to spread your money between savings accounts with different banks.

While the government-backed Financial Services Compensation Scheme (FSCS) would refund your savings up to a maximum of £85,000 (or £170,000 for a joint account) should your bank collapse, this limit is for each bank, not each individual account. In other words, if you had two accounts each containing £85,000 with one bank you would only be entitled to a total of £85,000 in compensation.

It is important to remember that if you have more than one account containing £85,000 with two banks in the same banking group, you would get total compensation of £85,000, unless each of the banks are individually authorised by the Financial Conduct Authority.

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