The £276bn earning no interest in UK bank accounts – and what to do if some is yours

So much talk has been at the crossover point of the public’s money and politics of late: interest rates lowering, an ongoing discussion over potential changes to ISA allowances, minimum wage increases and more.

It can be hard to follow it all and understand what it means for your own finances – which makes it all the more important to simply keep track of your own current financial circumstances and maximise them wherever possible.

So, when data emerges showing £276 billion was being held in December in accounts paying precisely zero interest, that has to be a concern, because it’s an immediately identifiable issue and a very routine one for people to solve.

To put into context that figure, while it is slightly down on the £282bn from November, the Financial Times report it being double the amount in zero rate accounts from ten years ago. And if that money was moved to an account paying even a three per cent interest rate, that would be an extra £8.3bn for savers.

So what does it mean if you’re holding money in an account which pays no interest, and what should you do about it?

Firstly, it’s important to understand that money which earns no interest loses value. This is because of inflation, which was super high in the UK (and elsewhere) for a couple of years before starting to come back under control (partly due to higher interest rates) last year, but even so, the forecasts for 2025 still estimate it could be 3.5 per cent or even more.

That means for every £100 you have earning no interest, by the end of the year it could be “worth” £96.50, in terms of what you can buy with it. Inflation pushes prices up, but your bank notes retain the same numbers on them. Even the target rate of two per cent inflation would still see your money have lower spending power in future.

So, getting your money to earn money itself is important to at least keep pace with inflation and not erode your savings.

Easy access is important

Plenty of people might not want to lock large sums away right now, and that is fine. Fixed-term savings accounts can sometimes get you a better rate (and you should consider using these if you have spare funds you might not need for six months or longer) but access to your money is important too.

But that doesn’t mean just leaving your cash in an easy-access or current account which pays no interest.

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It might be that you have money in a savings account which the terms have expired on and now pays you nothing – in that case, look for a new savings account which pays a competitive interest rate.

Or, you might just be used to seeing money go into your current account and leave it there while you spend. If that’s the case, definitely start to look at opening a new savings account and working out how much you can put into it each month (or whenever you’re paid) to start building a savings pot which does pay you.

You can still get savings accounts which allow access to your money when you need it – just be sure to check the terms of them to make sure they suit your needs.

Rates are still competitive

Laith Khalaf, head of investment analysis at investment platform AJ Bell, said: “Back when interest rates were near zero, it wasn’t hugely rewarding to move from an account paying no interest, but that has now dramatically changed. Many savers could do themselves a huge favour by switching to more competitive accounts”.

The truth is, over the last year there have been plenty of accounts which have paid five per cent, six per cent or even more – though many come with limitations such as how much you can put in a month, how often you can withdraw and so on. Those rates have come down now, but there’s still plenty out there which beats or gets close to the rate of inflation.

But if those highest-paying accounts don’t suit your needs, the answer isn’t to do nothing.

For starters, if your own bank doesn’t offer a product which you like the look of…then move.

The Current Account Switch Service makes this an easy process and you can at times be rewarded for switching banks, with some offering cash bonuses to do so. That also may come with access to savings accounts with higher rates – again, check terms for which suit you.

And you don’t have to move banks entirely to open a savings account at a new place either, so there’s little excuse for not finding one paying a better rate than one currently offering you nothing at all, especially given many can be set up now on mobile, in an app and in just a few minutes – quite possibly with a “digital” bank you already use as a secondary or spending account.