Half of retirees could be missing out on hundreds of pounds of interest each year due their savings being in accounts with rates of 3 per cent or less a year.
According to research from PensionBee, 42 per cent of British pensioners aged 66 to 80 have substantial cash savings, ranging from £20,000 to more than £200,000.
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.
Only 1 per cent of working age adults have savings worth £200,000 or more, compared with 5 per cent of over 65s.
PensionBee calculated 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.
But if their cash was held in an account with a 5 per cent rate, they would receive £2,500 in interest after a year.
But for a working age adult with £5,000 in savings, the difference between the 2 per cent account and the 5 per cent account after a year would be £150 in lost interest (£100 after a year in the 2 per cent account, versus £250 after a year in the 5 per cent account).
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.
But almost half of 65s and 54 per cent of adult workers reported earning 3 per cent or less on their savings, while 17 per cent of both workers and retired people did not know the interest rate currently being paid on their savings.
Becky O’Connor, director of public affairs at PensionBee, said the older generation had the most to lose from keeping money in an account that did not pay a competitive rate of interest.
She added: “Sadly, it appears a high proportion are missing out on the best savings rates.
"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.”
The research also found over-65s appear to prefer instant-access accounts, which tend to pay less interest than notice accounts.
More than half (59 per cent) of this group opted for instant-access compared to 37 per cent of working age savers.
Across both age groups, cash Isas and regular savings accounts were identified as popular forms of cash savings, with almost one in five pensioners admitted to relying solely on cash as their primary form of savings.
amy.austin@ft.com
