Millions of savers are losing hundreds of pounds a year by leaving cash in accounts paying less than the rate of inflation, new figures show. With inflation at 3.3 per cent and set to rise further in 2026, many are effectively losing spending power despite their balance appearing to grow.
Analysis by savings app Spring of CACI data reveals £612.4 billion is held in savings accounts paying three per cent interest or less. The average balance in such accounts is £8,812, meaning someone with £10,000 in a low-paying one per cent account could miss out on more than £280 a year compared with a competitive easy-access deal.
Rachel Springall, finance expert at Moneyfacts, said: “Loyalty does not pay, yet savers may feel like it’s not worth switching their account, or leave an old pot untouched, assuming it will still earn a reasonable rate of interest.” She added that convenience should not come at a cost, and keeping an instant access pot with a high street bank paying a paltry rate is unwise.
Clare Stinton, senior personal finance analyst at Hargreaves Lansdown, warned that the long-term impact of inflation is often underestimated. “If the interest you’re earning doesn’t keep pace with inflation – put simply, prices are rising faster than your money is growing – you’re losing spending power,” she said. Her calculations show £5,000 earning three per cent would grow to £5,808 after five years, compared with £6,259 at 4.5 per cent. Over 15 years, the gap widens to £7,837 versus £9,808.
Many high street banks still offer rates between one and two per cent, less than half the best available deals. Spring’s Derek Sprawling said: “A lot of savers are still being hit by a loyalty penalty; by leaving their savings with their current account provider they’re often earning a far lower rate than they realise.” Research found 31 per cent of savers keep money with their current account provider out of habit, while 26 per cent worry about losing instant access.
Experts urge savers to check their current rate and consider switching to a more competitive account to avoid losing money in real terms.
