Cash savers are seeing their wealth eroded by almost £150 a month as inflation climbs further ahead of interest rates.
Savings rates lag way behind the rate of inflation, with the average easy-access account paying just 0.73pc, according to analyst Moneyfacts. With inflation at 10.1pc, this means a saver with a £20,000 deposit is losing £1,702 a year in real terms, or £142 a month.
Savers are facing the lowest real return on their cash since the 1970s, according to analysis from the insurer Scottish Friendly and the Centre for Economics & Business Research, a consultancy. The last time cash returns were poorer was in February 1976.
Interest rates on cash Isas have improved in recent months, but they are also failing to keep up with inflation. The average easy-access cash Isa rate is now 0.76pc, according to Moneyfacts.
Rachel Springall, of Moneyfacts, said it was important for savers to shop around in order to secure the best deals on the market.
“Savers must not become apathetic as they could miss out on a lucrative rate,” she warned. “Challenger banks continue to jostle for table-topping positions to entice savers’ deposits, so it’s wise to keep a close eye on the moving market.”
The best-paying savings account on the market was from Cynergy Bank, paying 1.85pc for the first 12 months and then reverting to a 1.7pc variable rate. However, even this best-buy rate is well below inflation. A saver with £20,000 deposited would lose £1,499 of their cash in real terms over the next year, earning just £370 in interest.