UK savings interest rates and the £800 gap savers miss

Around £300 billion is held in UK current and savings accounts earning 0% interest, according to analysis by Moneyfactscompare.co.uk reported on 18 September 2026 by Reach titles including Somerset Live and Lancs Live, and by the Daily Express. Moneyfacts puts the cost to households at as much as £12 billion a year in forgone interest. The same data set shows why the shortfall exists rather than simply that it does. The average easy-access savings rate now stands at 2.54%, some easy-access deals pay around 4% while still allowing withdrawals, and the biggest banks pay an average of just 1.16% on their flexible easy-access accounts. Three published figures frame the cost of inertia: 0%, 1.16% and 4%. What follows is the arithmetic of that spread at ordinary balances, the reason so few people act on it, and the point at which tax starts to shrink the prize.

Cash is not the only place household money has been sitting still, and readers who have been weighing it against harder assets may recognise the pattern from record gold prices in Hatton Garden and across the UK.

What the £300 billion figure measures

The headline number is a stock, not a flow. Moneyfacts analysis, as reported by Somerset Live and Lancs Live on 18 September 2026, identifies roughly £300 billion sitting in UK current and savings accounts that pay nothing at all, and values the annual interest forgone at up to £12 billion.

A second, independent measurement points the same way. In a post on X dated 17 September 2026, the BBC Money Box presenter and financial journalist Paul Lewis cited Bank of England Table A6.1 and wrote: "Banks have £915billion of our money in savings accounts paying average 1.64% and £305bn in accounts paying 0% - average 1.23%. They can deposit that with BoE which pays Bank Rate 3.75%. Over last 12 months banks made £28.5bn profit on our money!"

Taken together, those two lines describe about £1.22 trillion of household deposits, of which the £305 billion paying 0% is roughly a quarter. Moneyfacts also reports that around 45% of savings accounts pay less than the Bank of England base rate of 3.75%, so the problem is wider than the zero-interest pile alone.

The shortfall at £5,000, £10,000 and £20,000

The gap between a 0% account and a 4% easy-access savings account is worth about £200 a year on £5,000, £400 on £10,000 and £800 on £20,000, on the figures reported by Moneyfacts. Move instead from the big banks' 1.16% average to 4%, and the same balances gain roughly £142, £284 and £568 a year before tax.

The £10,000 and £20,000 rows for the 0% and 4% columns, and the £284 figure, are Moneyfacts numbers as reported. The £5,000 row and the £568 figure follow from applying the same two rates, 1.16% and 4%, to those balances. All are gross annual interest, before any tax and before any rate change.

The distance travelled since the ultra-low rate era is part of why the spread has grown. In September 2021 the average easy-access rate was 0.17%, Moneyfacts reports. It is now 2.54%, and the average rate across new savings products has reached 3.67%, the highest since February 2025, when it was 3.69%.

Why savers stay put

Rachel Springall, finance expert at Moneyfactscompare.co.uk, puts the cause in behavioural rather than financial terms. "Busy lives and complacency set in, making it a little too easy to just leave cash sitting in a current account that pays no interest," she said in comments reported on 18 September 2026.

She also set out what the market allows a saver to demand. "Ideally, savers need to aim for a return of 4 per cent on a fully flexible easy-access account that allows unlimited withdrawals to move cash to and from a current account as and when it's needed," Springall said, adding that "the most flexible accounts from the big banks pay an average rate of just 1.16 per cent".

That is the shape of the trade-off. The reason many people hold cash in a main-bank account, instant availability, is not actually exclusive to big bank savings rates. On the Moneyfacts figures, accounts near 4% exist that permit unlimited withdrawals, which removes the usual justification for accepting 1.16%. Experts quoted in the 18 September 2026 analysis attributed the stickiness to habit and convenience rather than to any lock-in.

Lewis's post supplies the other half of the incentive. If a bank can place deposits in a Bank of England reserve account paying Bank Rate, then the margin on a 0% or 1.16% balance is the business, not a by-product of it. The £28.5 billion figure is Lewis's own calculation from Bank of England Table A6.1.

What tax does to the gap

The Personal Savings Allowance lets basic-rate taxpayers earn up to £1,000 of savings interest a year before tax is due, and higher-rate taxpayers £500. At a 4% rate, £1,000 of interest corresponds to £25,000 of savings, so a basic-rate taxpayer with £20,000 in a 4% easy-access account would not reach the threshold on that balance alone.

Context: The Personal Savings Allowance has not been changed since it was introduced, and frozen income tax thresholds mean more savers are being pulled into higher bands, according to Moneyfacts commentary reported on 18 September 2026.

That is the honest qualifier on the headline shortfall. For a basic-rate taxpayer with a modest balance, the gross gap and the net gap are the same, because no tax is due. For a higher-rate taxpayer, whose allowance is £500, £12,500 at 4% is enough to exhaust it, and the marginal pound of extra interest is then taxed. Pension income complicates it further. In an inews.co.uk reader question published in the outlet's weekly money series, Rosie Hooper, a chartered financial planner at Quilter Cheviot, was asked how savings interest above £1,000 is taxed by someone drawing £12,570 a year from a pension, and noted that more people are now seeing interest exceed the allowance.

Where the allowance is likely to be breached, Springall said, tax-free wrappers matter. "Cash ISAs will continue to be a huge help for savers trying to shield their hard-earned cash from tax," she said. On Moneyfacts figures, cash ISA rates average 2.76% for easy access and 4.35% for a one-year fix.

The case for not treating 4% as the only answer

Against all of the above, the 4% easy-access comparison is a best-buy rate, not a market average, and no provider offering it is named in the published figures. An easy-access rate can be cut at short notice, which is the structural weakness of the product the whole calculation rests on.

Fixed terms currently pay more on average than easy access, with Moneyfacts putting the average one-year fixed bond at 4.39% and the average five-year bond at 4.49%. They also remove the flexibility that Springall identifies as the reason easy-access accounts are popular in the first place. Which choice suits an individual saver depends on when the money is likely to be needed.

What is established is narrower and more useful. A balance earning 0% or 1.16% is earning less than the same money would in an account with the same access, on rates published in September 2026.

What happens next

Two things would change the numbers above. The first is Bank Rate, currently 3.75% on the figure Lewis cited from Bank of England Table A6.1, which sets the ceiling for what banks earn on reserves and shapes what they offer depositors. The second is the savings rules change expected in 2027, which Springall said would make the landscape more complex.