The UK’s adults are missing out on the best part of a billion pounds a year in savings interest by leaving their cash to languish in low-interest accounts.

Sainsbury’s Bank says almost £14 billion is sitting idle in poorly paying accounts.

If the owners transferred the lot to accounts paying 6 per cent annual interest, it calculates they could share an extra £800 million a year.

It’s no coincidence, of course, that Sainbury’s offers just such a 6 per cent account.

And it is good value, beating the market average by almost 2.4 per cent.

The problem is that if you’re a basic rate taxpayer, you’ll lose a fifth of that interest in savings tax, and if you pay at the higher rate, the taxman will take two-fifths.

That makes 6 per cent interest worth just 4.8 per cent or 3.6 per cent, depending on your tax bracket.

Which is why you’d be even better off with a best buy tax-free mini cash Isa.

The market leader is National Savings & Investment’s instant access, no-strings Direct Isa, paying 6.3 per cent – and because it’s tax-free, the taxman gets none of it.

Now that’s what I call a good investment.

This entry was posted on Tuesday, July 10th, 2007 at 9:10 pm and is filed under UK Personal Finance, Savings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.