The 5 Minute Guide to zombie savings accounts

The Momentum UK Team 30 January 2014

Beware of zombie attack! Savers are waking up to the threat of zombie savings accounts: is it time to bring yours back to life?

What are zombie savings accounts?

Zombie accounts are (un)dead savings accounts that are closed to new customers, and often pay scarily low amounts of interest. Rates in these accounts have been seen to fall as low as 0.05% which would give you an annual return of just 50p on a savings pot of £1,000.

Because banks focus so much of their efforts on getting new customers in, existing customers can find that their account goes zombie once their attractive introductory rate has expired.

 How far has the zombie invasion spread?

According to Which? Money, there are around 1,952 instant access and notice savings accounts in the UK, but just 390 are open to new customers. Some 607 pay 0.5% or less in interest, and 258 pay less than 0.1%. Research from RateSetter found that 80% of savings accounts in the UK are zombies.

How can I keep my savings alive?

Even though interest rates in general are at a low in the current market, it’s important to be aware that there may still be steps that you can take to make your money work harder.

The research from RateSetter found that 79% of Britons aren’t checking their savings against inflation - keep an eye on the latest inflation figures and check them against your current rate to make sure your savings aren’t eaten away by the cost of living.

The same survey found that 52% of savers don’t know what rate they’re currently getting. Make sure you check up regularly on your returns, and don’t be afraid to switch if your rate drops. You may find that you can switch to a different account with your current provider, but you may also be able to move elsewhere for better rates. You may also want to consider that different types of savings accounts often offer different rates - but be aware that higher interest rates usually come with restrictions on the level of access to your money.

Remember that you may be able to make more out of your savings by using your full cash ISA allowance, which will protect the interest you earn from tax. If you haven’t used your allowance for the current tax year, you have until 5th April to get your deposits in!

If you remember to check on your savings regularly, move them when you need to and take advantage of tax allowances where they could save you money, you can help your savings to escape the zombie invasion.