Savers missing out on almost £5bn in interest despite the value of their cash being eroded by inflation
- Savers losing £4.8bn in interest leaving cash in accounts paying next to nothing
- Inflation hit 9% in April – the highest it has been in 40 years
- The last time inflation was this high savers could earn 9.75% from easy-access
Savers are losing £4.8 billion in interest by leaving cash in accounts paying next to nothing.
Inflation is at its highest in 40 years but savers are far worse off than four decades ago.
In March 1982, when inflation was last at 9 per cent, you could earn 9.75 per cent in an easy-access account.
Flat rates: Inflation is at its highest rate for four decades. But savers are far worse off than they were 40 years ago when easy access accounts paid 9.75%
Spending power was not eroded because the interest paid outstripped the rate of inflation.
With inflation, a £10,000 nest-egg would have been worth £10,075 in a year. Yet while rates have edged up, there are no deals today that come close to beating, or matching, inflation.
Even a top easy-access rate of 1.25 per cent means that same £10,000 will tumble to £9,225 over 12 months — a 7.75 per cent or £775 loss.
Analysis by Paragon Bank of more than 30 top providers shows there is £418 billion of savers’ money in accounts paying paltry rates, so they are missing out on £4.8 billion of interest per year.
The Bank of England base rate has risen to 1 per cent, yet easy-access rates with the big banks have limped up to just 0.1 per cent.
With inflation at 9 per cent, this means a £10,000 lump sum would be worth £9,110 in real terms after 12 months.
The gap between big banks’ rates and the best deals is widening, now at 1.15 percentage points. A year ago, it was only 0.49 points.
The top easy-access account with Atom or Tandem Bank pays 1.25 per cent.
Chase Bank UK pays a higher 1.5 per cent but only to savers who hold a current account, managed via a mobile app.