Business & Finance, News

Savers missing out on almost £4 billion amid high inflation and low interest rates

October 20th, 2017
Author: Economic Voice Staff

Low cash ISA rates and high inflation have left UK savers £3.81 billion short, new estimates from Willis Owen reveal. With inflation hitting a five year high of 3% this week, the average UK cash ISA saver has lost out on £445 this year.

The £270 billion held in cash ISAs over the last year [1] has reduced in real terms, and savers will now find themselves missing out. Using publicly available data, Willis Owen has calculated that with cash ISA rates hovering around 1%, cash ISAs will not be worth the £276 billion now needed to account for inflation.

Jason Chapman, Managing Director at Willis Owen, comments:

With inflation now hitting the 3% mark, significantly below the average return available on a cash savings account at 1%, cash savers have been left short changed this year. Couple this with low growth in wages and it’s clear why people might choose to spend rather than save.

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“Interest rates may go up to 0.5% in November but for this year’s cash ISA savers, that rise will be too little too late. Savers need to start thinking longer-term and should consider other options, such as investing in the stock market, if they are to keep pace with rising inflation.

Willis Owens ISA Gap

Over the last ten years, investing in stocks and shares ISAs have outperformed cash ISAs. Investing in the stock market has provided an annual return of 5.91% over the last ten years, compared to 2.57% for the average cash ISA.

[1] www.gov.uk/government/uploads/system/uploads/attachment_data/file/640743/Full_Statistics_Release_August_2017.pdf

Important: 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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