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  • The cost of being average

    08 May 2015

While interest rates are not where they were before the financial crisis, failure to shop around still carries a significant cost for UK savers.

Since opening its doors in 2014, Paragon Bank has offered consistently competitive interest rates on its saving accounts and featured regularly in the UK’s best buy tables.

Using the current interest rates offered by Paragon Bank on its One and Two Year Fixed Rate Savings Accounts of 1.65% and 2.21% AER* respectively, we demonstrate the ‘cost of being average’ by calculating the gross interest that savers will lose by accepting the average rate offered by the UK’s biggest banks and building societies** rather than saving for an equivalent term with Paragon Bank.

For savers willing to tie up their money for a one year period, the cost of being average*** is:

One Year Fixed Rate Savings Account

  Interest earned with Paragon Bank* Average interest earned with other banks and building societies** Cost of being average***
Interest rate 1.65% 1.23% 0.42%
Saver with £10,000 to invest £165 £123 £42
Saver with £50,000 to invest £825 £615 £210
Saver with £100,000 to invest £1,650 £1,230 £420

For a two year term, the cost of being average increases with savers at Paragon Bank benefitting even more. Over two years, the cost of being average is:

  • £159 of lost interest for a £10,000 deposit
  • £794 of lost interest for a £50,000 deposit; and
  • £1,588 of lost for a £100,000 deposit

Two Year Fixed Rate Savings Account

  Interest earned with Paragon Bank* Average interest earned with other banks and building societies** Cost of being average***
Interest rate 2.21% 1.43% 0.78%
Saver with £10,000 to invest £447 £288 £159
Saver with £50,000 to invest £2,234 £1,440 £794
Saver with £100,000 to invest £4,468 £2,880 £1,588

*Interest rate at 6 May 2015. AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded on an annual basis.

**Bank of England, Average Quoted Household Interest Rates, Last updated 1 May 2015

***Calculation assumes no capital or interest is withdrawn until the end of the term

Your eligible deposits with Paragon Bank are protected up to a total of £85,000 by the
Financial Services Compensation Scheme (FSCS), the UK's deposit guarantee scheme.
See how you're protected
Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551