Hundreds of thousands of savers have been issued a stark warning: cash held in accounts paying 2.5% or less is eroding in real terms, with the latest CPI inflation reading at 2.6%. New analysis of CACI data by savings app Spring reveals that the average balance in these low-paying accounts is £8,099 — meaning anyone with around £8,000 in savings is seeing the purchasing power of their money quietly drain away.
The scale of the problem is immense. In total, £502 billion of adult savings sits in accounts earning 2.5% or under, according to the data. Within that, £155.8 billion is held in 735,000 accounts with balances above £100,000, all paying 2.5% or less. These high-balance accounts are losing substantial sums to inflation every year.
More than 621 million savings accounts across the UK earn below the rate of inflation, meaning their real value is declining. For the average account holder with £8,099, the annual loss is around £8.10 in today’s money — a modest amount individually, but collectively it represents a massive transfer of wealth away from prudent savers.
Why 2.5% is not enough
The basic arithmetic is simple: if inflation is 2.6%, a savings account must pay at least that much just to keep pace with rising prices. Anything less delivers a negative real return. The analysis found the typical low-paying account earns exactly the 2.5% threshold, leaving a 0.1 percentage point shortfall. Over five years, that compounds into a larger erosion of real purchasing power.
This issue is not limited to small balances. A saver with £150,000 in such an account would earn £3,750 a year at 2.5%, but would need £3,900 to match inflation — a £150 shortfall each year. And for the 735,000 accounts above £100,000, the aggregated losses run into millions of pounds.
The 'current account coaster' phenomenon
Derek Sprawling, Head of Money at savings app Spring, part of Paragon Bank, is concerned that many savers have become complacent. He said: “Today’s figures are a timely reminder of a growing challenge for savers. More than 10 million savings accounts with balances of over £10,000 are earning less than the rate of inflation, paying an average return of just 1.43%.
“That excludes money sitting in current accounts, which often pays no interest at all. For many people, the real value of their hard-earned savings is being steadily eroded by rising prices.”
Sprawling also took aim at high street banks: “High street banks are offering little to no interest on savings whilst making it unnecessarily difficult to access better alternatives, resulting in the rise of ‘current account coasters’.”
How to check if you are losing out
Anyone can quickly assess whether their savings are beating inflation by comparing the account’s interest rate to the CPI figure of 2.6%. If the rate is below that, the balance is losing value in real terms. The data suggests the average affected saver has £8,099 sitting in a low-paying account, but the problem extends to all income levels.
For those with larger sums, the impact is magnified. The £155.8 billion held in 735,000 accounts over £100,000 is earning at most 2.5%, a rate that fails to keep pace with the cost of living. Even a 0.1% underperformance seems small, but on a £100,000 balance it amounts to £100 a year — and at current inflation, it’s actually worse because many accounts pay far less than 2.5%.
Expert advice: don’t ignore flexibility
Despite the urgency to find a better rate, Sprawling cautions against choosing an account solely on interest yield. “A competitive interest rate is important, but it should not be the only consideration. Savers should also think about how easily they can access their money when an unexpected bill or important life moment arises,” he said.
“The right account should offer a strong return while giving people the flexibility and reassurance that their savings are there when they need them.”
In practice, that could mean splitting savings between an easy-access account for emergencies and a higher-paying notice or fixed-term account for money that won’t be needed immediately. The key is to ensure that inertia — leaving savings in a default low-paying account — does not become a costly mistake.
As inflation continues to hover above 2.5%, the case for reviewing savings arrangements has never been stronger. While no single switch can eliminate all risk, taking a few minutes to compare rates and account features can mean the difference between preserving your wealth and watching it silently shrink.
