More than half of retirees could be missing out on hundreds of pounds of interest each year by keeping their savings in accounts with rates of 3 per cent or less a year, research from PensionBee has suggested.

The research found that retired savers face potentially far steeper losses than the rest of the adult population from keeping savings in lower interest accounts, with a "high proportion" missing out on the best savings rates.

According to the analysis, nearly half (42 per cent) of British pensioners aged 66 to 80 have substantial cash savings, ranging from £20,000 to over £200,000, after a lifetime of work.

In contrast, a quarter of working age adults in Britain have less than £1,000 in cash savings, with only 17 per cent of this demographic reporting cash balances exceeding £20,000, and only 1 per cent of working age adults have savings worth £200,000 or more, compared with 5 per cent of over 65s.

Demonstrating the impact of this, the research revealed that a retiree with a savings balance of £50,000 in an account paying 2 per cent interest would receive £1,000 in interest after one year, whilst holding their cash in an account with a 5 per cent rate would deliver £2,500 in interest after a year, marking an additional £1,500.

There were also some “encouraging” results though, as PensionBee found that a higher proportion of over 65s reported having best buy interest rates on their savings, with 33 per cent saying they had a rate of 4-5 per cent, compared with 24 per cent of working age adults.

Despite this, almost half (42 per cent) of 65s and 54 per cent of adult workers reported earning 3 per cent or less on their savings, while more than one in six (17 per cent) of both workers and retired people did not know the interest rate currently being paid on their savings, meaning they are likely to be missing out on top rates.

The research also suggested that pensioners may be using their savings accounts for income in retirement, rather than or as well as flexi-access drawdown, with over half (59 per cent) of over 65s opting for instant-access compared to 37 per cent of working age savers.

In addition to this, more pensioners noted having an instant-access account than having a workplace or private pension (45 per cent), suggesting some pensioners may have already withdrawn most or all of their pension savings and placed them into a cash savings account.

Indeed, the research also found that almost one fifth (18 per cent) of pensioners admitted to relying solely on cash as their primary form of savings.

Commenting on the findings, PensionBee director of public affairs, Becky O’Connor, stated: “When choosing accounts, hundreds of pounds of interest a year is at stake for retired people, who in general have built up more substantial savings over the years than younger workers.

"Older people need whatever wealth they have built up to last their whole retirement, potentially pay for some care and also to leave an inheritance.

"It’s crucial this money is preserved and so some prefer the safety of cash accounts to leaving their retirement money in the stock market. So making sure they are getting the best return possible on their savings is really important."

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