Inflation and low interest rates are a major headache for savers.
UHY Hacker Young report that UK consumers have just over £1 trillion in UK bank accounts with an average interest rate of 1.6%, well below the two main measures of inflation; the Consumer Price Index (CPI) and Retail Price Index (RPI).
Consumers trying to get a real return on their savings often turn to fixed rate bonds or Cash ISAs (Individual Savings Accounts) however even these accounts offer little relief with an average interest rate currently of 2.57%.
Amazingly £110 billion is in accounts which pay no interest whatsoever.
According to the same report the combination of high inflation and low interest rates has reduced the real value of savings in the UK by over £36 billion this year, more than double the £15.75 billion in interest which has been paid out to savers.
Mark Giddens, partner at UHY Hacker Young, said: “The amount of money eroded away through inflation is staggering. In this climate of high inflation, savers need to be more proactive and shop around to get the best rates.
“Unfortunately for savers, the kinds of savings rates on offer from the biggest banks are unlikely to change any time soon.”
Very few savings accounts provide an inflation beating return although savers found some relief with the recent reintroduction of National Savings Index Linked Certificates which pay a tax free return linked to RPI.