January 01: Yorkshire Building Society warns £5,001+ earn 1% or less
Yorkshire Building Society has warned that more than 12 million UK current accounts holding £5,001 or more earn 1% or less in interest. That is costly for savers and could shift money towards higher-rate accounts as 2026 begins. Yorkshire Building Society urges customers to review UK savings rates and move idle balances to better-paying options, improving returns while reducing cash drag. Rising deposit switching could also lift banks’ funding costs and squeeze net interest margins, increasing competition for retail deposits across the UK. See details and practical steps below source.
Why low current account interest hurts savers
If your balance is above £5,001 and your bank pays 1% or less, your money is not working hard. Yorkshire Building Society highlights this common gap, with over 12 million current accounts affected source. In real terms, low current account interest lags typical savings deals and may trail inflation, reducing spending power over time. Reviewing your account terms is a simple first step.
Every extra percentage point of interest on £10,000 is worth £100 a year before tax. Keeping large sums in a low-paying current account leaves easy gains on the table. Shifting surplus cash to UK savings rates that exceed your current account interest can raise annual income without taking market risk. Separate day-to-day spending from savings to keep liquidity and still earn more.
Implications for UK banks and markets
When savers search for better yields, banks often match with higher offers or lose balances to rivals. Early-year switching in 2026 may lift deposit betas, pushing up funding costs and narrowing net interest margins. Yorkshire Building Society’s warning adds urgency, as customers become more rate-aware. We expect sharper pricing on selected savings products, especially where churn risk is highest.
More targeted promotions, limited-time bonuses, and segmented pricing are likely. Easy-access and notice accounts may see perks to retain sticky balances. Fixed terms could carry clearer breaks and caps. Savers should check FSCS protection, which covers up to £85,000 per person per authorised bank group, and ensure they do not exceed limits when spreading cash across high-interest savings providers.
Practical steps for UK savers today
Log in to online banking and find the exact AER on your current account. If it is 1% or less and you hold more than £5,001, consider moving excess cash. Keep a small buffer for bills and emergencies, then compare UK savings rates. Yorkshire Building Society’s alert is a prompt to audit all balances, including joint accounts, and confirm how interest is calculated.
Shortlist easy-access for flexibility, notice accounts for slightly higher rates, and fixed terms for certainty. Read rules on withdrawals, minimum deposits, and any bonus periods. Use tax wrappers wisely. ISAs offer tax-free interest, while the Personal Savings Allowance can cover up to £1,000 for basic-rate payers and £500 for higher-rate payers. Additional-rate payers have no allowance, so tax-free wrappers matter.
Final Thoughts
Yorkshire Building Society has put a clear figure on the problem: millions of UK customers earn 1% or less on balances above £5,001. That is a call to act. We suggest a simple plan. First, confirm your current account interest and ringfence only what you need for bills. Second, move surplus cash to better UK savings rates that suit your access needs. Third, manage tax by using ISAs and your Personal Savings Allowance, and keep within FSCS limits. For banks, early-2026 switching could raise funding costs and trim margins, so expect sharper competition for deposits. Small changes today can add meaningful, low-risk income over the year.
FAQs
Yorkshire Building Society warned that more than 12 million UK current accounts with balances above £5,001 earn 1% or less in interest. Savers are urged to review their rates and consider higher-paying UK savings options to improve returns, especially as early-2026 switching pressures banks to compete harder on deposit pricing.
As a rule of thumb, every extra 1 percentage point on £10,000 generates £100 a year before tax. If your current account interest is 1% or less, even a modest move to a higher rate can add meaningful income. Keep enough cash for bills, and shift the rest to a better-paying account.
Yes, if more people switch to higher-rate products, banks’ funding costs can rise and net interest margins may narrow. Early-2026 could see stronger deposit competition. We expect more targeted offers on high-interest savings as banks aim to retain balances and reduce churn from rate-sensitive customers.
Confirm the AER, any bonus periods, withdrawal limits, and minimum deposits. Check FSCS protection and stay under £85,000 per person per bank group. Consider tax: ISAs are tax-free, and many people benefit from the Personal Savings Allowance. Make sure the account’s access rules match your cash needs.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
