Warning Over 67 Million Savings Accounts: Inflation Threatens Your Funds

With inflation currently outpacing savings interest rates, millions of UK savers are facing a financial squeeze. A warning has been issued about 67 million active savings accounts that are failing to offer enough returns. Experts are urging savers to take action as their funds lose value in real terms.

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Inflation threatens savings accounts
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A new warning has been issued for 67 million savings accounts in the UK, as low interest rates fail to keep pace with the rising cost of living. With inflation currently at 3.6%, millions of savers are at risk of watching the value of their savings erode. This situation is compounded by shockingly low returns offered by banks and financial institutions.

Spring, a savings app, has raised concerns that as much as £660 billion is locked in savings products offering rates of 3.5% or lower. In a time of high inflation, this means the purchasing power of savers is being significantly diminished. 

Derek Sprawling, managing director of Spring, has stressed the urgency for people to reassess where their money is stored, warning that “today’s inflation figure should serve as a wake-up call.”

The Impact of Low Interest Rates on Savers

The current interest rates on savings accounts are not enough to counteract the effects of inflation, which means many savers are losing money in real terms. According to Spring, savings accounts offering interest rates of 3.5% or less have seen £660 billion invested, but these returns are failing to even meet inflation, let alone provide meaningful growth.

This situation is a cause for concern, particularly as inflation shows little sign of slowing. Derek Sprawling warned that the increasing rate of inflation makes it more important than ever for savers to ensure their money is working harder. 

“Unlike most big bank easy access savings accounts, there are no hidden surprises with Spring—no bonus rates, restrictions, or fees,” Sprawling said, highlighting the transparency and simplicity that Spring offers to its users.

Alternatives to Low Interest Savings Accounts

While the outlook for savings accounts in traditional banks is less than promising, there are alternatives that offer higher returns. For example, Plum’s Cash ISA currently offers a rate of 4.98%, while Cahoot’s Sunny Day Saver provides 5% on balances up to £3,000. 

These options, while more competitive, still face the challenge of variable rates, with experts warning that these rates may decrease if the Bank of England’s base interest rate continues to fall.

Adam French, consumer expert at Moneyfactscompare.co.uk, highlighted the risks of opting for easy access accounts, noting that variable rates can be unpredictable. 

“Some of the best returns can currently be found with easy access accounts, such as Plum’s Cash ISA, which is paying 4.98 per cent, or the Cahoot Sunny Day Saver which is paying five per cent on balances of up to £3,000,” he said.

In a climate where inflation is eroding savings, it is crucial for savers to carefully consider where they place their money to ensure their financial security is not compromised.

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