Anyone with savings of around £8,000 has been given an urgent warning. New research has revealed £502 billion is currently held in adult savings accounts earning 2.5% and under, failing to keep pace with inflation at 2.6%.
62 million savings accounts are earning 2.5% and under, leaving millions of savers losing money in real terms. £155.8 billion is held in 735,000 accounts with balances over £100,000 earning 2.5% and under in interest.
Average balance of £8,099
The average account earning less than 2.5% has a balance of £8,099. The total balance of adult savings held in accounts earning 2.5% and under stands at £502 billion, according to new analysis of CACI data by savings app Spring.
With the CPI rate of inflation at 2.6%, this means 62 million savings accounts earning 2.5% and under are losing value in real terms as their interest rate fails to keep pace with rising prices.
Large balances also affected
The analysis 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. 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.
On average, savings accounts holding more than £10,000 but earning less than 2.5% interest pay just 1.43%. Across all accounts with balances above £10,000, the average interest rate is still only 2.91%.
Expert comments
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.”
“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.”
Current account inertia
Other research has shown that a quarter (24%) of people leave money sitting in current accounts at the end of the month rather than transferring it into a savings account, according to a survey. Many current accounts offer zero or minimal interest, meaning individuals could risk seeing inflation diminish the real value of their cash. One in six (17%) of this group leave more than £5,000 sitting in their current account, with men being especially prone to leaving large sums of cash not earning interest, according to the survey, commissioned by banking provider Chase.
Shaun Port, managing director for daily banking and savings at Chase, said: “Every pound you save should be working as hard as possible for you. Moving your money into a higher paying interest account is a simple step that can make a real difference – helping your savings grow faster and bringing your goals within reach. We know consumers feel proud and motivated when they see their money moving in a positive way.”
“Compounding interest is a powerful tool that allows your savings to grow faster over time. The main advantage is that you earn interest not only on your original deposit but also on the interest that accumulates, creating a snowball effect. This means your money works harder for you, and even small amounts can grow significantly if left untouched. When you create a positive habit, consistency follows.”
More than 12 million current accounts earning 1% or less
Yorkshire Building Society research suggested that over 12 million current accounts in the UK, with balances exceeding £5,001, are likely earning 1% or less in interest. This implies that people are losing out on significant interest - and their money could be working much harder for them.
Tina Hughes, director of savings at Yorkshire Building Society, said: “Millions are still missing out on easy wins – like earning interest on their savings.”
Over half (55%) of individuals in the most recent survey admitted to feeling stressed about their finances, and nearly a quarter (24%) plan to utilise a credit card to cover costs.
Opinium Research conducted a survey of 2,000 people across the UK in November. The results were compared with a previous Opinium Research survey of 2,000 people in September 2024. Yorkshire Building Society also utilised analysis of Caci’s current account database for the research into interest on accounts.
