A toxic combination of record low interest rates and rising inflation is threatening to wipe out around £6bn per year of the UK’s £700bn cash savings pot, according to online investment service, Wealthify.
With inflation hitting 1.2% in December and average cash savings rates struggling to exceed 0.25%, the majority of British savers’ pots are effectively shrinking by nearly 1% per year. Unless savers act now to find alternative ways to grow their money, they will watch their hard-earned cash slowly disappear into an inflation black-hole.
Richard Theo, CEO, Wealthify said: “Britons are going to be billions of pounds poorer. £6bn is a staggering amount of money to vanish from savings accounts each year and should serve as a stark warning to the millions of savers resigned to ‘put up’ with low returns.
“It doesn’t have to be like this. Alternatives to cash savings exist that offer savers a better chance at growing their money. People spend hours hunting for bargains, especially at Christmas. Why are they not applying this attitude towards their savings and finding alternative ways to protect and improve their financial futures? With inflation set to hit 4% by 2017, the rate at which inflation eats away at people’s nest eggs is only going to increase.”
Wealthify calculated the annual net savings loss using official FCA figures on average cash savings returns (FCA Sunlight Report, Dec 2015), The FCA Cash Savings Market Report and official ONS inflation data. Annual inflation currently sits at 1.2%, while easy access cash savings offer an average 0.25% return, creating a net return of -0.95%