5th November 2026
Savers are urged to review their pots regardless of changes to the Base Rate, as they risk paying a “loyalty tax”, according to Moneyfactscompare.co.uk analysis.
The Bank of England Base Rate is widely expected to rise by 0.25%, to 4%, the first hike in three years (August 2023). A further rise of 0.25% is predicted for February 2027.
However, savers might not feel the full benefit on variable rate accounts that are not directly tied to BBR moves.
“Loyalty tax” evident - Over the past three years, a closed easy access savings account has returned £139 less on a £20,000 pot, compared to a live (on sale) option (0.22% average difference). This also means savers could have lost money in real terms over this period, as CPI was only briefly on target back in 2024.
Savings inertia a challenge - Around half of UK savings accounts (43%) fail to pay more than the Bank of England Base Rate (BBR) of 3.75%.
Convenience comes at a cost - The biggest banks pay an average rate of just 1.16% on their flexible easy access accounts*, down from 1.85% in November 2023.
Fixed rate bonds and ISAs - Average rates rising across one- and five-year terms, savers must check if they are due to pay tax on their interest earned due to fiscal drag.
The Moneyfacts Average New Savings Rate is 3.79%, its highest point since September 2024 at 3.80%. The rate has increased every month since March 2026.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said, "Savers have endured years of unrewarded loyalty, with those leaving cash in closed accounts losing out on an extra £139 over the past three years compared to on sale easy access accounts.
To add insult to injury, they could easily have secured a rate of 4% with a top rate deal throughout this period, so it shows the importance of shopping around for a better rate for flexible pots.
Savers must make time to review their old accounts because there is no guarantee that increases to the Bank of England Base Rate will be passed on to them. Only if savers have a flexible pot that’s tethered to BBR will they see an uplift, for others, it could be time to switch and ditch their old account.
“The “loyalty tax” is evident for savers who leave their cash in a convenient flexible pot with their high street bank. Indeed, the most flexible accounts from the big banks* pay an average rate of just 1.16%. What’s worse is that over £306bn is currently languishing in zero-interest current and savings accounts, according to the Bank of England. This means savers are missing out on billions of pounds of interest, as many challenger banks and mutuals are paying inflation-busting rates that allow unlimited withdrawals and deposits, the same convenience that consumers expect from a simple current account. However, if savers have a lump sum, they could be earning even better guaranteed returns with a fixed rate bond or ISA.
“Another layer of consideration for consumers amid rising interest rates is savings tax, as due to fiscal drag, many more savers are facing a tax bill on their savings income, a tax that is set to rise. From April 2027, the savings income tax rate is rising by 4% across the board. Those savers with a healthy nest egg, such as a house deposit, could be breaching their Personal Savings Allowance (PSA), where they get a £1,000 interest-earned limit as a basic-rate taxpayer, but only £500 as a higher-rate taxpayer, with no allowance for those above.
A 5% return on a £25,000 pot would return £1,250 per year in interest. This makes the appeal of Cash ISAs ever more enticing, so it is no wonder that a staggering £45bn has been deposited so far this year. Now that the Government has made a U-turn to keep the full £20,000 Cash ISA allowance, it will be a great time for savers to ensure they are making the most of it to protect their hard-earned cash from tax.”
With the cost of living squeezing incomes why leave any cash no mattrhow small sitingin a low interest accouunt. Do you really want to give the banks bigger bonuses?