Investments  

Savers set to lose billions due to eroding inflation

Savers set to lose billions due to eroding inflation

This is the total amount that UK savers have been forecast to lose over the year from their cash savings thanks to the eroding power of inflation.

According to data from digital financial advice firm MoneyFarm, approximately £1.2trn is sitting in low-interest rate bank accounts and cash Isas.

The data also suggested that £167bn has been left in accounts that pay absolutely no interest at all and another £265bn is locked up in cash Isas that pay an average of only 1.34 per cent a year.

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Paolo Galvani, chairman and co-founder of MoneyFarm, said: “Savers who park their wealth in low-interest accounts run the risk of sabotaging their saving prospects.

“While strategies which have historically offered higher returns, such as stocks and shares Isas, may go through periods of volatility, that should be less important for medium and longer-term investment.”

Total value destroyed by low interest rates = £4.1bn

Account type

Total money in UK accounts

Interest rate on these amounts

Interest paid on these accounts

Non-interest bearing

£167.4bn

0.00%

£0m

Current

£594.3bn

0.78%

£4.6bn

Savings

£187.9bn

1.46%

£2.7bn

ISA

£264.9bn

1.34%

£3.6bn

Total

£1.2trn

average - 0.90%

£10.9bn

Total value destroyedby low interest rates

£4.1bn

 

*Bank of England Forecasts of Annual CPI Inflation Q2 2016-Q1 2017, CPI 1.24%

**Figure according to research from Investment Life & Pensions Moneyfacts.

***Research from Barclays Equity Gilt Study.