Low cash ISA rates and high inflation will leave the UK’s savers £5 billion short, new research from Willis Owen reveals.

The figures pose serious questions over people’s incentive to save and come as the ONS revealed the savings ratio has hit an all-time low of 1.7%.

The £269 billion currently held in cash ISAs will only be worth an estimated £272 billion in real terms next year, as interest rates on cash ISAs have dropped to an average of 1% p.a. Research from Willis Owen, the online investment service provider, reveals that when taking into account the aggregate forecast rise in inflation over the next year, the sum would need to grow to £277 billion for people to afford the same goods and services as they can this year, meaning there’s a £5 billion shortfall.

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Jason Chapman, Managing Director at Willis Owen, comments:

There can be little surprise that people’s appetite to save is at a low given that there’s not much to be gained from saving money into cash. Indeed, people are losing money in real terms, with inflation now edging up towards 3% – significantly below the return available on a cash savings account. Couple this with low growth in wages and the choice of spending or saving for a rainy day is for many becoming increasingly weighted towards spending.

“We need a change in savings culture. When inflation was low the threat to the buying power of people’s cash savings was negligible. That is no longer the case and a more long-term mentality is required in order to achieve real returns on savings.

Investing in stocks and shares ISAs has, over the long term, provided a higher annual compound return – at 5.91% over the last ten years, compared to 2.57% for the average cash ISA. But the combination of low interest rates and inflation at a four year high of 2.9%, are causing cash ISA savers to lose money in real terms.


Stocks and shares investing carries with it a higher level of risk than cash. Investing should be considered a medium to long term commitment, (normally 5-10yrs), as over short periods, markets can be more volatile and result in a wide range of positive and negative returns. The longer you stay invested, the greater the probability that your investment will generate a positive return. Although, there is no guarantee!

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