Over £54bn of adult cash ISA savings are earning 2% interest or below, with the majority being held in instant access accounts, Paragon Bank has found.

The bank’s analysis of CACI data, which compiles the cash savings deposits of 40 providers, revealed that £52.4bn held in instant access accounts was earning 2% or below, which can be easily switched to higher paying accounts.

Furthermore, just £1.7bn was held in fixed rate ISA accounts earning 2% or lower.

This compares to £250.6bn held in non-ISA accounts earning 2% or below, with £234.7bn in access accounts. Based on 7.2 million instant access adult cash ISA accounts earning 2% or below, the average balance in each account stands at £7,252.

However, CACI’s data shows that there are 1.6 million accounts containing a balance of more than £10,000, and 18,305 accounts containing between more than £85,000 and up to £100,000.

An ISA saver with a balance of £7,252 earning 1.5% would earn £108.78 in interest over the year, but if this balance was transferred into an access account earning 4%, the interest generated would more than double to £290.08.

Managing director of saving at Paragon Bank, Derek Sprawling, said: "Over 96% of cash ISA balances earning 2% or below is held in instant access variants, meaning that people can easily switch that money into a better paying account. On average, these accounts contain over £7,000 and that money could be generating much better returns by switching. Many savers overestimate the effort involved in switching a cash ISA. I’d encourage anyone receiving under 2% to consider their options.

"On the plus side, it’s positive that savers are protecting their money from tax by keeping it within an ISA wrapper, but on the downside, there’s billions of pounds that could be working harder by being moved to higher paying accounts."

---