13 June 2011
Publications that covered this story included the Sunday Telegraph, 12 June 2011, the Daily Express, 12 June 2011 and the Daily Mirror, 12 june 2011.
Our research shows that UK Savers are losing more than £36 billion a year as inflation erodes any interest earned by their savings and current accounts.
Low interest rates across savings and current accounts, combined with high levels of inflation (RPI 5.2%) means that the nation’s savings are gradually declining in value.
Even traditionally higher interest savings accounts, such as ISAs or other fixed term accounts, pay an average of just 2.57% interest per year, which is far below inflation. (Interest rates as calculated in March 2011.)
Bank of England figures reveal that over £110 billion is currently deposited in accounts yielding 0% interest. UHY Hacker Young points out that money deposited in these non-interest bearing accounts, as well as any account offering interest rates below inflation, will actually decline in value on a monthly basis as the cost of living continues to rise.
Mark Giddens, tax partner in our London office, comments: “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.”
The consolidation of banks during the financial crisis may have stifled competition over rates.
High-street banks and building societies that lost their independence during the credit crunch, including: Britannia, Dunfermline Building Society, Bradford & Bingley and Alliance & Leicester and of course HBOS.
Mark Giddens continues: “With Lloyds’ acquisition of HBOS during the credit crunch, nearly one-third of the UKs current accounts came under their control.”
“When you factor in the small number of big competitors, namely RBS and Barclays, it is clear that there are not nearly enough entities competing to offer customers the best deals.”
“In this kind of environment, the onus is very much up to the consumer to do their own leg-work and to find the best savings for themselves. Unfortunately for savers, the kinds of savings rates on offer from the biggest banks are unlikely to change any time soon.”
Interest from savings accounts eroded by inflation
| Total money in UK current and savings accounts | £1,003,742.00 million |
| Annual interest on this amount | + £15,747.77 million |
| Value of savings eroded by inflation in a year before interest (RPI) | £52,194.58 million |
| Value of savings eroded by inflation in a year after interest (RPI) | £36,446.81 million |
| Value of savings eroded by inflation in a year before interest (CPI) | £45,168.39 million |
| Value of savings eroded by inflation in a year after interest (CPI) | £29,420.62 million |
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