Almost a third (32 per cent) of people do not know what interest rates they are getting on their savings, research from Hargreaves Lansdown has revealed.
The research, which surveyed 2,000 people in October 2023, also revealed people who tend to have less saved were more likely to be ignorant about interest rates.
It found that 37 per cent of women did not know what interest rate they are getting on their savings compared to 27 per cent of men.
Older savers were also found to be more in the dark about their interest rates than their younger counterparts, with 38 per cent of 35-54 year olds being ignorant compared to 30 per cent of 18-34 year olds.
It was also revealed that those who are less engaged with their finances are also unsure of the rate they're getting.
The survey asked respondents to calculate the impact of inflation on their savings and those who didn’t attempt to answer the question – and just said they didn’t know – tended to fare worse in other aspects of financial resilience.
It was reported that 47 per cent of these people do no know how much interest they’re making.
Impact of ignorance
This ignorance could impact negatively on savers as Hargreaves Lansdown head of personal finance, Sarah Coles, explained: “If you don’t know the interest rate, you could be paying the price in all sorts of ways.
“You won’t know whether the account is competitive, or whether you could get a much better rate by moving your money.
“If your savings are languishing in an easy access account with a high street giant, you might well be able to double your interest by making a move.”
Coles also stated that ignorance on interest could risk overestimation of the interest savers are making, and therefore assume that their money is “working harder than it is”.
This means that savers may rule out alternatives to an easy access account - including fixed rate accounts which offer higher interest rates in return for tying up their money, and investments.
Additionally, Coles warned that savers may underestimate their interest rate and therefore run the risk of triggering a tax bill.
She explained that basic rate taxpayers have a personal savings allowance of £1,000 and higher rate taxpayers have £500 but, if savers make over these amounts in interest then they will be liable for tax.
tom.dunstan@ft.com
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