Quilter has urged savers to be more active, as analysis reveals they have been losing money in real terms for 16 months in a row, with cash ISA and instant access savings rates falling while inflation has risen.
Quilter’s analysis shows that in February, CPI inflation was 3%, down from 3.9% in July last year, its highest level since January 2024. However, despite this fall in inflation, cash ISA rates have remained unchanged in that same period, locking in a real term loss of 1.25%.
Since October 2024, the last time average cash ISA rates provided a real return, those rates have declined by nearly a third (32%). For an average instant access savings account, the real term loss stands at 0.85% a year, with a positive return not being seen since December 2024.
According to the Bank of England, £300 billion of savers’ cash is languishing in accounts that are paying no interest whatsoever.
As such, Quilter is urging savers with short-term and medium-term savings to use cash savings platforms that provide access to multiple providers in one place, allowing savers to switch in and out of the best rates.
For longer-term savings, the firm said cash ISA savers should consider a stocks and shares ISA, with returns more likely to keep pace with, or even exceed, inflation.
Quilter’s CashHub found the best instant access savings rate is 3.61%, offering a real return of £61 for every £10,000 saved, compared to a real loss of £12.50 and £8.50 through an average cash ISA and instant access savings account respectively.
Holly Tomlinson, financial planner at Quilter, said: “For well over a year now, savers have been hit by the scourge of inflation as cash savings rates have lagged inflation and look set to for the foreseeable future. People putting their money into these savings accounts are, more likely than not, to be locking in real term losses, reducing their money’s future value.
“Savings rightly play a key role in people’s finances. They offer good short- and medium-term options to park your money but if you are to make the most of it then people need to be active. Cash savings platforms offer an easy way to get access to above inflation rates, allowing you to seamlessly manage your money in real time across a number of providers.”
Tomlinson said that in the longer term, people need to be prepared to put their money to work by investing for five years or more.
“This has proven to be the best way to beat inflation over the long term consistently. Saving and investing can co-exist happily as part of someone’s overall financial situation. So long as you are managing the risk that inflation presents, that is the most important action someone can take,” she added.
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