Millions of Britons are being warned that their savings accounts are losing value in real terms, as new data reveals that a staggering 69.41 million accounts are paying 3% interest or less, falling short of the current inflation rate of 3.3%.
Massive Amounts of Money Earning Below Inflation
Analysis of CACI data by the savings app Spring shows that approximately £612.4 billion is held in adult savings accounts that pay less than 3%. This means that the purchasing power of these savings is being eroded over time.
Derek Sprawling, head of money at Spring, commented: "As inflation sits at 3.3%, it's vital for savers to make sure their money is working as hard as possible, otherwise its value is eroded over time. Today, £612.4 billion is sitting in accounts earning under 3%, which means millions of people are effectively going backwards in real terms. This should be a wake-up call."
Large Balances Affected
The research found that 12.7 million people have £10,000 or more in accounts paying less than 3%. These accounts average an interest rate of 2.81%, meaning they earn around £281 per year. If the rate were 3.3%, they would earn an additional £49 annually.
Furthermore, 894,000 individuals are holding more than £100,000 in savings accounts that pay 3% or less, significantly impacting their potential returns.
Expert Advice for Savers
Mr. Sprawling added: "Too often, people stick with a familiar provider and don't notice when their rate has slipped, or they assume their bank is still giving them a fair deal. It's worth taking a few minutes to check what you're earning and to shop around."
He urges savers to review their current interest rates and consider switching to a provider offering interest above 3.3% to help their savings keep pace with the rising cost of living.
