Get moving if you want all that nest-egg money to grow

WHEN did you last check how much interest your bank was paying on your hard-earned savings? If you've left your money lying in the typical easy access savings account for a while then you may be in for a shock.

The average easy access savings product currently pays interest of just 0.96 per cent before tax, according to research produced for The Scotsman. Of more than 380 easy access accounts available, one in four pays 0.10 per cent or less and half pay 0.5 per cent or less. Just 155 accounts pay 1 per cent or more, and of those, just 86 pay at least 2 per cent, the Defaqto figures show.

The Bank of England base rate remains at a record low of 0.5 per cent and inflation continues to ravage the millions of pounds held in savings accounts. Yet few people are prepared to make their money work harder by switching to a better deal.

David Black, head of banking at Defaqto, said: "In this era of low interest rates it really is worth proactively reviewing your savings account if you want to get the best return.

"It's important not to fall into the trap of holding the same account for a long time. This is because most of the highest-paying easy access savings accounts are recent launches and either include an introductory bonus or a guaranteed interest rate."

Just 7 per cent of bank customers switched current account between 2008 and 2010, according to the recent Independent Commission on Banking report, which said the sheer range of accounts on offer makes it difficult for consumers to work out if they can get a better deal elsewhere. The ICB report also found that consumers have tended not to switch current account even where better deals have existed elsewhere.

That can also apply to savings accounts, with some banks offering dozens of options. Not only does that make it harder to identify the most suitable account, but a growing number of those products feature bonus periods, after which the rate becomes distinctly less attractive.

While the big high street names hold the bulk of deposit-based savings, they are also the worst culprits when it comes to paying virtually nothing on most of their savings accounts.

Yet the UK's biggest banks - Bank of Scotland/Halifax, Lloyds TSB, Royal Bank of Scotland/NatWest, Santander, HSBC and Barclays - offer new customers products that produce far greater returns than those paid to long-term customers stuck in easy access accounts.

For example, the easy access Bank of Scotland Liquid Gold product is a savings account in name only, paying 0.05 per cent. Royal Bank of Scotland has four different easy access accounts all paying just 0.10 per cent, according to Defaqto.Similar specimens include the Lloyds TSB easy saver, Santander's flexible saver and the Barclays e-savings product - all of which hold millions in hard-earned savings.

Instead of letting your bank get away with paying such low rates of interest on your savings it's time to make it earn your custom. As competition heats up in the savings market, banks and building societies seek to entice new customers with eye-catching savings rates. But these are rarely exclusive to new customers, so there's nothing stopping you taking advantage of the deals.

For example, Bank of Scotland also has a four-year fixed-rate Isa saver paying 4.4 per cent and an easy access Isa at 3 per cent. Similarly, savers in the various RBS easy access accounts have several substantially more generous products to which they can switch, including a fixed-rate Isa paying 3.8 per cent.

If you're a customer stranded in Santander's 0.10 per cent flexible passbook saver, it's worth taking a look at the 3.7 per cent two-year fixed-rate Isa with the bank. And millions of Barclays customers may be getting a pathetic 0.10 per cent on its e-savings account, but the bank also has an Isa paying 3.2 per cent.

Andrew Hagger, head of communications at Moneynet.co.uk, said: "While there are often better rates available from your existing bank, you need to ensure the better-paying accounts are suitable.

"The accounts are often only available online, contain restrictions on the number of withdrawals or may contain an introductory bonus for the first 12 months only."

But if you are comfortable with those limitations, switching to a higher-earning product is a logical step to take.

If you're changing to a different account within the same bank it should prove a quick and painless process. You don't need to stay with the same bank, but for many people reluctant to take their business elsewhere, the easier step of staying where you are but asking for a better deal may be worth taking.

And remember that by leaving your money in a rock-bottom rate savings account you're not only losing out on valuable interest payments, but you're helping your bank boost its profits with indecent ease.

As Hagger pointed out, the low inflation rate may be wreaking havoc with savings, but it's no reason not to get the best possible deal.

""It's important to keep saving as much as you can afford," he said. "This way you'll continue to build the size of your nest egg and will be in a better position to take advantage of higher rates in the future."