Nearly £1 trillion is languishing in easy access accounts paying an average interest rate of 0.18%

The cost of living crisis has put extra financial pressure on people across the UK as the domino effect of high inflation and rising interest rates hits the household budgets of millions of Britons.

Despite these challenges, new research has revealed savers across the UK have left their cash to stagnate in easy access accounts with ultra-low rates, some as low as 0.01%.

According to the Telegraph, the Bank of England report nearly £1 trillion is languishing in easy access savings accounts with interest rates that average just 0.18%. That’s just £18 annual interest for every £10,000 you save.

As inflation continues to rise, savers are not only failing to ensure their money is benefiting from the best possible interest rates, but they are also seeing the “real” value of their savings diminish over time as the cost of goods and services continues to increase.

Read on to learn about the effect current high inflation is having on your savings and some steps you could take to ensure your wealth continues to grow.

Ensuring your savings have the best interest rates makes a significant difference

The difference between the money generated by rock-bottom interest rates compared to the best rates on the market can be significant.

Over the course of a year, if you saved £10,000 in an account on the average low rate of 0.18% you would earn only £18. Compare this to the £167 you could earn on the best possible interest rate, reported by Moneyfacts on 18 August 2022 to be 1.67%.

A solid first step to take is to review the interest rate you receive on your cash savings, and to move your cash into a different account if there is a suitable one that pays a higher interest rate.

High inflation erodes the real value of your savings

The Office for National Statistics (ONS) reports that, as of July 2022, UK inflation sits at 10.1% and is expected to rise throughout the remainder of the year. Goods and services that cost £100 a year ago would cost, on average, £110.10 today.

Due to these rising costs, millions of Britons have been left with less disposable income to meet their monthly expenses.

It also affects your cash savings as the current inflation rate exceeds even the best interest rates. As you read above, even the best interest rate on an easy access account as of 18 August 2022 was only 1.67%.

Had you invested £100 a year ago at this rate you would have £101.67 now. This is significantly less than the increase in the cost of goods and services due to inflation and so your wealth would have lost value in real terms.

Investing could help to ensure your surplus cash grows in real terms

It is vital in uncertain times to make sure you have money set aside, not only for your future, but also for any short-term emergencies that may occur.

If the worst were to happen, having an emergency fund of three to six months’ worth of expenses can help you and your family to cover essentials such as your mortgage and bills.

Once you’ve moved these funds into the most appropriate easy access account, you will want to consider the next best steps for your surplus cash.

Keeping your funds in a savings account is unlikely to prevent the real value of your money being eroded by inflation. So, if you have a time frame of five years or longer, you could consider investing any surplus cash to give it the potential to grow in a way that keeps you on track to meet your long-term lifestyle and retirement goals.

Investing in the stock market has its associated risks. However, by working alongside a financial planner, you can put together a diversified portfolio that can help you maintain the risk at a level suitable to your own circumstances.

While past performance is no indication of future performance, IG report that, over the last 119 years, UK stocks have averaged annualised returns of 4.9% above the rate of inflation.

Get in touch

If you would like to discuss how you can grow the real value of your wealth in an environment of high inflation, we can help.

Get in touch by email at or call us on 0345 505 3500.

Please note

Investments carry risk. The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.