As many as 62 million UK savings accounts are earning less than 2.5% and failing to keep pace with inflation, new figures show. As much as £502 billion is currently held in adult savings accounts earning less than inflation, leaving millions of savers losing money in real terms.
Large balances in low-paying accounts
The analysis of CACI data by savings app Spring also highlights that substantial sums are being held in low-paying accounts, even among savers with larger balances. Spring found £437.2 billion is held in accounts with more than £10,000, and £155.8 billion is held in accounts with more than £100,000, despite all earning 2.5% and under in interest.
Derek Sprawling, Head of Money at Spring, commented: “Today’s figures are a timely reminder of a growing challenge for savers. More than 10 million savings accounts with balances of over £10,000 are earning less than the rate of inflation, paying an average return of just 1.43%. That excludes money sitting in current accounts, which often pays no interest at all. For many people, the real value of their hard-earned savings is being steadily eroded by rising prices.”
Advice for savers
“A competitive interest rate is important, but it should not be the only consideration. Savers should also think about how easily they can access their money when an unexpected bill or important life moment arises. The right account should offer a strong return while giving people the flexibility and reassurance that their savings are there when they need them.”
In total, 10.3 million accounts contain over £10,000 and 735,000 accounts have over £100,000 in balances earning 2.5% or under.
Inflation-busting offers from banks
The warning comes as high street banks and building societies offer inflation busting interest rates in a bid to entice savers. The Bank of Scotland recently launched a bumper savings account offering an 8% interest rate that allows current account holders with the lender to open a Monthly Saver account, which offers the opportunity to save £25 to £250 per month with 8% AER guaranteed for 12 months. Similarly, The Tipton and Coseley Building Society is offering customers an impressive 7% return for customers who are looking to save up to £125 a month.
