Inflation-adjusted compound returns (per £1 saved)
| |
Moneyfacts Average Savings Rate
|
Easy Access - Average rate
|
Easy Access - top Rate
|
1-yr fix - Average Rate
|
1-yr fix - Top Rate
|
|
2014-20
|
£0.00
|
-£0.05
|
£0.00 |
+£0.02 |
+£0.06 |
|
2020-2026
|
-£0.13
|
-£0.19
|
-£0.05
|
-£0.10
|
+£0.01
|
Annualised average and top rates compounded and compared against Bank of England inflation data over the same periods. Moneyfacts Average Savings Rate is calculated from the total of all on-sale, core market, variable and fixed rate savings accounts and Cash ISAs. Standard exclusions apply: Regular savings, children’s accounts, LISAs and JISAs.
Source: INTEREST from Moneyfacts
2014–2020: Limited damage as real returns flatlined
During this period, inflation was relatively subdued and savings rates were low. Real returns hovered around zero.
• Easy access accounts delivered between £0 and -5p per £1 saved in real terms.
• Average one-year fixed rates were broadly flat.
• The very best one-year fixed deals generated modest real gains of 2p to 6p per £1 saved.
It was far from a golden age, but the damage to the value of savings was contained.
2020–2026: Deeper real losses despite rising savings rates
The picture changed sharply after 2020. Inflation surged, and although savings rates rose, they trailed behind price growth. The result was significantly larger real losses:
• Average easy access: -19p per £1 saved
• Average one-year fix: -10p per £1 saved
• Top easy access: -5p per £1 saved
• Top one-year fixes: just +1p per £1 saved
Even competitive easy access rates failed to keep up with inflation. Only the very best one-year fixed deals managed to deliver a marginal positive real outcome, and then only for savers willing to lock their money away and actively chase top rates.
Adam French, Head of Consumer Finance at Moneyfacts, said:
“Many savers have already lost up to 19p per £1 saved in real terms since 2020 as rising costs have consistently run ahead of the rates paid on cash savings. And now another financial storm is coming with inflation forecast to spike again.
“The root of the problem for cash savers isn’t high inflation or low interest rates alone; it’s the sustained gap between the two. Whenever savings rates fall behind inflation for a prolonged time purchasing power can be steadily chipped away – along with our financial resilience.
“Many savers either building their fundamental cash buffers or looking to put a lifetime of savings to use have found their progress undermined. Rates were too low for too long in the 2010s and then slow to catch up with the inflation shock of the 2020s. The result is that many cash savers have been left materially worse off as borrowers benefited from cheaper rates and successive Governments avoided higher debt costs.
“If cash savings quietly lose value year after year, households are less likely to feel secure enough to spend or invest. While central banks are rightly focused on inflation, prolonged periods of negative real returns risk undermining financial confidence at a household level. Instead, savers are often left topping up what can feel like a leaking bucket. For savers, the interest rate is only half the story. If returns don’t at least keep pace with inflation, the real terms costs can pile up and take years to undo.”
Read more in the latest issue of the INTEREST journal, which you can read for free here. Part or all this press release can be reproduced, so long as we are sufficiently sourced.
- ENDS
INTEREST is dispatched in advance of meetings of The Bank of England’s Monetary Policy Committee and is distributed free of charge.
To receive the latest issue and sign up please visit: https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
Have an opinion? Letters to the Editor invited:
interest@moneyfacts.co.uk
Inflation-adjusted compound returns (per £1 saved)
| |
Moneyfacts Average Savings Rate
|
Easy Access - Average rate
|
Easy Access - top Rate
|
1-yr fix - Average Rate
|
1-yr fix - Top Rate
|
|
2014-20
|
£0.00
|
-£0.05
|
£0.00 |
+£0.02 |
+£0.06 |
|
2020-2026
|
-£0.13
|
-£0.19
|
-£0.05
|
-£0.10
|
+£0.01
|
Annualised average and top rates compounded and compared against Bank of England inflation data over the same periods. Moneyfacts Average Savings Rate is calculated from the total of all on-sale, core market, variable and fixed rate savings accounts and Cash ISAs. Standard exclusions apply: Regular savings, children’s accounts, LISAs and JISAs.
Source: INTEREST from Moneyfacts
2014–2020: Limited damage as real returns flatlined
During this period, inflation was relatively subdued and savings rates were low. Real returns hovered around zero.
• Easy access accounts delivered between £0 and -5p per £1 saved in real terms.
• Average one-year fixed rates were broadly flat.
• The very best one-year fixed deals generated modest real gains of 2p to 6p per £1 saved.
It was far from a golden age, but the damage to the value of savings was contained.
2020–2026: Deeper real losses despite rising savings rates
The picture changed sharply after 2020. Inflation surged, and although savings rates rose, they trailed behind price growth. The result was significantly larger real losses:
• Average easy access: -19p per £1 saved
• Average one-year fix: -10p per £1 saved
• Top easy access: -5p per £1 saved
• Top one-year fixes: just +1p per £1 saved
Even competitive easy access rates failed to keep up with inflation. Only the very best one-year fixed deals managed to deliver a marginal positive real outcome, and then only for savers willing to lock their money away and actively chase top rates.
Adam French, Head of Consumer Finance at Moneyfacts, said:
“Many savers have already lost up to 19p per £1 saved in real terms since 2020 as rising costs have consistently run ahead of the rates paid on cash savings. And now another financial storm is coming with inflation forecast to spike again.
“The root of the problem for cash savers isn’t high inflation or low interest rates alone; it’s the sustained gap between the two. Whenever savings rates fall behind inflation for a prolonged time purchasing power can be steadily chipped away – along with our financial resilience.
“Many savers either building their fundamental cash buffers or looking to put a lifetime of savings to use have found their progress undermined. Rates were too low for too long in the 2010s and then slow to catch up with the inflation shock of the 2020s. The result is that many cash savers have been left materially worse off as borrowers benefited from cheaper rates and successive Governments avoided higher debt costs.
“If cash savings quietly lose value year after year, households are less likely to feel secure enough to spend or invest. While central banks are rightly focused on inflation, prolonged periods of negative real returns risk undermining financial confidence at a household level. Instead, savers are often left topping up what can feel like a leaking bucket. For savers, the interest rate is only half the story. If returns don’t at least keep pace with inflation, the real terms costs can pile up and take years to undo.”
Read more in the latest issue of the INTEREST journal, which you can read for free here. Part or all this press release can be reproduced, so long as we are sufficiently sourced.
- ENDS
INTEREST is dispatched in advance of meetings of The Bank of England’s Monetary Policy Committee and is distributed free of charge.
To receive the latest issue and sign up please visit: https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
Have an opinion? Letters to the Editor invited:
interest@moneyfacts.co.uk
