Bank unveils six strategies 'successful' savers are using to 'boost' their investment pots

Paragon Bank has unveiled six strategies “successful” savers have been using to increase their investment pots.

The bank conducted a study, which surveyed over 1,000 individuals with “significant” sums of cash in their savings accounts to find what they’ve been doing to build them.

The most effective three strategies, according to the research, include prioritising ISAs, utilising fixed-term savings accounts, and being “interest rate savvy”.

Derek Sprawling, managing director of Savings at Paragon Bank commented: “Building a significant savings pot often comes down to tried-and-tested methods.

“Maximising your ISA allowance, utilising fixed-term rates, and being disciplined about reviewing and switching accounts are all proven strategies for success.”

However, a “growing adoption” of more sophisticated approaches is also being seen.

The survey also found three additional strategies employed by these successful savers, which include leveraging introductory rates, avoiding withdrawals and “laddering” for stability.

Mr Sprawling said: “We’re also seeing a growing adoption of more sophisticated approaches like laddering. This allows savers to benefit from competitive fixed rates while maintaining some flexibility with easily accessible funds, ultimately smoothing out the impact of interest rate fluctuations.”

Paragon Bank also found that this group of “successful” savers are more likely to make lump sum deposits (36 percent) compared to those with smaller savings of between three and six months’ outgoings (22 percent).

Interestingly, they automate savings less frequently (15 percent) compared to those with lower balances (41 percent).

Cash ISAs

A Cash ISA (Individual Savings Account) is a tax-efficient savings account available in the UK, allowing individuals to save money without paying tax on the interest earned.

These have become increasingly popular over the past two years during the period of high interest rates, as more people investing in normal savings accounts have been dragged into tax brackets.

People can save up to £20,000 per year across the six types of Cash ISA, which include Stocks and Shares, Lifetime, Junior, Innovative Finance, and Help to Buy.

According to Paragon Bank’s research, a staggering 67 percent of successful savers prioritise maximising their annual ISA allowance, taking advantage of tax-efficient savings options.

Fixed rate savings accounts

Fixed-rate savers can be beneficial during the current period of falling rates, as these enable people to lock in an interest rate for a set length of time.

However, they typically impose stricter withdrawal limits on customers, meaning savers should be comfortable investing money without needing to access it during the account term.

Nearly two-thirds (65 percent) of “successful” savers have been utilising these types of accounts.

Interest-rate savvy savers

Nearly half (49 pecent) of successful savers demonstrated a commitment to being "rate savvy". This means they regularly review market interest rates and switch accounts to secure the best deals.

While savers aren't able to cash in on the peak interest rates seen last summer, some savings accounts are still paying rates of up to eight percent and a significant number of people are missing out.

A full list of top interest accounts this week can be found here.

Laddering

Paragon Bank said 32 percent of successful savers have been "laddering" their savings.

This refers to a technique where savings are spread across fixed-rate accounts with staggered maturity dates – to ensure consistent access to a portion of their funds while maximising returns.