Savings account warning to 69.4 million people – ‘going backwards’ | Personal Finance | Finance

Millions of people are “going backwards” financially by using savings accounts that pay less than inflation, experts warned. Some £612.4billion was being held in adult savings accounts that pay less than 3%, according to analysis of CACI data by savings app Spring.

With the CPI rate of inflation at 3.3%, they warned that 69.41million savings accounts earning 3% and under are losing value in real terms, as their interest rate fails to keep pace with rising prices. Derek Sprawling, head of money at Spring, said: “As inflation sits at 3.3%, it’s vital for savers to make sure their money is working as hard as possible, otherwise its value is eroded over time.”

He continued: “Today, £612.4billion is sitting in accounts earning under 3%, which means millions of people are effectively going backwards in real terms.

“This should be a wake-up call. I urge savers to review the rate they’re getting and consider switching to a provider offering interest above 3.3%, so their savings have a better chance of keeping pace with the cost of living.”

Savers with thousands of pounds in the bank were also using low-paying accounts, meaning they were losing out on larger lump sums of interest.

Spring found that 12.7million people had £10,000 or more in accounts that paid less than 3%. The average interest rate for these was 2.81%, which means they could earn £281 on maturity. If this was kept in an account paying 3.3%, they could make £49 more.

Some 894,000 people were holding more than £100,000 in savings accounts that paid 3% or less, meaning even bigger losses would apply.

Mr Sprawling added: “Too often, people stick with a familiar provider and don’t notice when their rate has slipped, or they assume their bank is still giving them a fair deal. It’s worth taking a few minutes to check what you’re earning and to shop around.”