Inflation rates are expected to rise again by the end of the year to 11%, despite currently being at its highest rate since 1981
The average UK saver has lost more than £1,000 over the past five years due to a combination of soaring inflation and low interest rates on saving accounts, according to personal finance comparison site finder.com.
With the average UK saver having about £7,500 put aside and easy-access savings rates losing 13.5% of their value to inflation since 2017, this means savers’ money will be worth over £1,000 less in real terms than five years ago.
Inflation rates are expected to rise again by the end of the year to 11%, despite currently being at its highest rate since 1981. If this happens and savings interest rates stayed the same, it would mean savings accounts would effectively lose 10.5%, or £789, in value each year.
Michelle Stevens, banking expert at finder.com, said: The fact that savings accounts are currently losing people a lot of money in real terms is yet another worrying outcome from the cost of living crisis.
They are still a prudent choice for many consumers given the security they offer and the fact that they do still earn you interest, however it may not be a sustainable option for many if inflation doesn’t start to come down soon, she said.
Stevens said: However, a bear market – that many predict will get worse – isn’t inspiring confidence in choices like investing or cryptocurrency either. The potential to get inflation-beating returns also comes with the possibility of losing some or all of your money.
One option to protect your money, for those under 40, is to get an ISA. A lifetime ISA offers a guaranteed 25% return (up to £1,000 per year), but it must only be used to buy a first property or taken out after reaching 60 or you will forfeit the interest on the account, she said.
Stevens added: Also, putting more into your pension pot could be another option as you get employer contributions and tax relief from the government.