Neglected bank accounts paying poor interest rates could be costing savers millions of pounds, advisers have warned.
Neglected or dormant accounts, otherwise known as 'zombie' accounts, which pay rates as low as 0.1 per cent were not as much of an issue when interest rates were low.
However, now interest rates have risen savers could be missing out on significant funds by keeping their money in these accounts.
Scott Gallacher, a chartered financial planner at Rowley Turton, helped a client unlock the potential for £18,000 in extra annual interest after the individual had £300,000 sitting in stagnant accounts.
He said: "Rising interest rates have resurrected the issue of zombie bank accounts. It's alarming to see so many people stuck in neglected bank accounts earning mere pennies on their hard-earned money.
"Hopefully, the FCA's new consumer duty rules, which require financial firms to deliver good outcomes for their clients, will force the banks to change their ways. However, I'm not holding my breath, and savers need to be proactive and check their accounts and interest at least once a year to ensure they avoid the zombie account trap.”
Rob Heath, wealth director at Net-Worth Ntwrk, said he has helped clients unlock more than £25,000 in the past eight months alone.
He said: "This would have otherwise sat in a ‘zombie’ account earning very little or no interest.
"This is a generational opportunity to earn a return on personal cash, yet still retain full control and access. It is unlikely that rates will remain high for a significant period, so it may be short-lived, but it's an opportunity that savers do not want to miss out on.”
While Joshua Gerstler, a chartered financial planner at The Orchard Practice, cautioned against holding large sums in bank accounts altogether.
He said: "There's no doubt that, after all the rate rises of the past year or so, millions of pounds in interest is being lost by savers unnecessarily.
“Having said that, we still recommend holding as little money as possible in bank accounts, as over the long term it is not a good place to leave your money.”
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
tara.o'connor@ft.com
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