A record number of consumers in the UK are leaving their money in bank accounts that pay them zero interest.
According to the Bank of England’s (BoE) figures for March 2022, a whopping £263bn ($347bn, €315bn) was left sitting in bank accounts.
And with the prospect of the worse cost-of-living crises in decades, energy bills skyrocketing, inflation continuing to grow, and a forecast recession in 2023, savers are being urged to make their savings work as hard as they can.
Alistair McQueen, head of savings and retirement at Aviva, said that the average interest rate on new fixed-term accounts is set to more than double this year – from 0.36% in December 2021 to 0.92% in March 2022.
“By shopping around, savers should be able to secure a fixed-term return of more than 2%,” he added.
Beginning of the end for cash Isas?
Cash Isa deposits also saw a year-on-year drop for the first time in a decade – from £294bn to £288bn according to the government’s annual savings statistics – despite being one of the most popular Isa products available to the market.
According to McQueen, this may be the first sign that the “era of investing in cash Isas may be passing”, especially considering the plummeting interest rates they offer.
“Basic rate taxpayers can now earn up to £1,000 of interest on cash deposits each year before having to pay any tax on these earnings,” he added.
“For higher rate taxpayers, the allowance is £500. Most now pay no tax on their cash savings, thereby removing the attraction of cash Isas.
“As inflation rises, it is critical to make all our savings work as hard as possible. Shopping around is more important than ever.”
