Savers have missed out on almost £4bn amid high inflation and low interest rates, according to research.
New estimates from Willis Owen have revealed that low rates offered by cash Isas and high inflation have left UK savers £3.8bn short.
With inflation hitting a five-year high of 3 per cent last week, the average UK cash Isa saver has lost out on £445 this year.
Jason Chapman, managing director at Willis Owen, said: “With inflation now hitting the 3 per cent mark, significantly below the average return available on a cash savings account at 1 per cent, cash savers have been left short changed this year.
“Couple this with low growth in wages and it’s clear why people might choose to spend rather than save.
“Interest rates may go up to 0.5 per cent in November but for this year’s cash Isa savers, that rise will be too little too late.
“Savers need to start thinking longer-term and should consider other options, such as investing in the stock market, if they are to keep pace with rising inflation.”
Using publicly available data, Willis Owen has calculated that with cash Isa rates hovering around 1 per cent, cash Isas will not be worth the £276bn now needed to account for inflation.
Money held in stocks and shares Isas has outperformed cash Isas over the past 10 years.
Investing in the stock market has provided an annual return of 5.91 per cent over the past 10 years, compared to 2.57 per cent for the average cash Isa.
Martin Bamford, chartered financial planner at Surrey-based Informed Choice, said cash savers have had a consistently tough time since the fallout from the global financial crisis and shift to lower interest rates.
He said: “In the current economic environment, moving from cash to investments is as unappealing as leaving money to languish in low interest bearing cash accounts.
“Savers should keep their accounts under regular review and keep in mind that banks profit from apathy.
“Should interest rates start to gradually rise, it will be even more important to shop around and move to the most competitive savings accounts.
“Savers also need to carefully consider whether cash Isas remain the best home for their savings, with the personal savings allowance often making directly held cash with more competitive interest rates a more attractive option.
“Advice is essential for anyone trying to achieve a financial goal, regardless of whether cash or investments are the right solution.”
