Brits are increasingly focused on saving, with Google searches for 'how to save money UK' jumping by 67 per cent in recent months and emergency funds now the top priority for 44 per cent of workers. However, new figures suggest millions are still leaving cash in accounts that lose money to inflation.
Low Interest Accounts Hold Billions
Analysis of CACI data by savings app Spring found £612.4 billion is currently held in savings accounts paying three per cent interest or less. With inflation at 3.3 per cent and set to rise in 2026, many savers are effectively going backwards in real terms. The figures cover 69.4 million savings accounts, with the average balance in low-paying accounts at £8,812. Someone with £10,000 in a one per cent account could miss out on more than £280 a year compared with a competitive easy-access deal.
Widespread Issue Among Larger Savers
The data also highlights how widespread the issue is among larger savers. Around £538.9 billion sits in accounts with balances above £10,000, while £185 billion is held in accounts with more than £100,000 – all earning below three per cent. Many major high street savings accounts continue to pay rates far below the best deals available elsewhere.
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. Convenience should not come at a cost.'
Why Inflation Matters for Savers
Inflation erodes purchasing power over time, meaning your money buys less even if the cash amount in your account rises. Clare Stinton, senior personal finance analyst at Hargreaves Lansdown, said: 'The invisible risk inflation poses to cash over the long-term is not talked about enough. If the interest you’re earning doesn’t keep pace with inflation, you’re losing spending power.' She added that something costing £10 in 2016 would now cost around £14.
According to calculations from Hargreaves Lansdown, £5,000 earning three per cent interest would grow to £5,808 after five years, compared with £6,259 at 4.5 per cent. Over 15 years, the gap becomes even wider: £7,837 at three per cent versus £9,808 at 4.5 per cent. Many high street banks offer rates between one and two per cent, less than half the amount you could earn elsewhere.
How Much Could Savers Be Missing Out On?
The biggest issue for many households is not necessarily inflation itself, but the low rates still attached to older or inactive accounts. Spring said many savers remain stuck earning around one per cent to 1.5 per cent interest, particularly in long-standing easy-access accounts with major banks. Someone with £10,000 in a one per cent account would earn just £100 in interest over a year. At 3.82 per cent, that would rise to £382 – a difference of £282 annually. For someone with £20,000 saved, the gap grows to £564 a year.
Derek Sprawling of Spring 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.' Moneyfacts said some older easy-access accounts are still paying less than one per cent. Springall pointed to one account paying just 0.9 per cent interest. On £20,000, that would generate £180 interest over a year, compared with £800 at a four per cent rate.
Why Many Don’t Switch – and What Savers Should Do Now
Despite savings rates improving over the past two years, inertia remains a major problem. Spring’s 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 to their cash. Closed accounts can also lag behind the wider market when rates rise, with some taking months longer to reflect higher Bank of England rates.
Experts say the first step is simply checking what rate you are currently earning. Easy-access accounts paying more than four per cent are still available, while some fixed-rate bonds and ISAs offer around 4.5 per cent. Stinton said savers should also think about tax. Basic-rate taxpayers can earn up to £1,000 interest tax-free outside an ISA, while higher-rate taxpayers get a £500 allowance.
'Savers should check what interest rate they’re earning and where they’re holding their cash,' she said. 'There’s a big difference between the top and bottom paying accounts on the market, so to get the best rate, it means shopping around rather than defaulting to your high street bank.' For those with emergency savings already in place, she added that it may also be worth considering longer-term options such as a Stocks and Shares ISA to give savings a better chance of outpacing inflation over time. When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.
