Client
Portal

Cost of “saver inaction”

Back to News & Views

Millions of savers think inflation will leave them better off

Despite inflation reaching its highest rate for many decades, some people in the UK are not aware of its impact on their finances. More than half of all cash savers (52%) don’t know what impact inflation will have on the real value of their cash savings over time

One in 10 (13%) incorrectly believe inflation will leave them better off and 13% think the real value of their savings would stay the same, according to new research[1].

Impact inflation could have on cash

More than a quarter (26%) say they don’t know what impact inflation could have on their cash
Millions of savers (64%, the equivalent of 10.3 million) have taken no action on their savings, despite cash earning next to nothing in interest and inflation rising steeply.
In fact, half of all savers (54%) currently keep their money in cash over the long-term.

Options to make money work harder

The total cost of “saver inaction” in such an environment could amount to £18 billion if this trend continues over the next five years[2]. Savers currently have £136 billion sitting in Cash Individual Savings Accounts (ISA) with on average interest rates equating to 0.26% per year[3].

Many savers don’t realise inflation is eating away at millions of pounds sitting in low-interest paying accounts. Whilst it is essential to keep some cash in the bank for an emergency fund, savers might want to consider other options to make their money work harder.

Three ways of protecting your savings from inflation

Tip 1: Work out how much to put aside as an easy-access emergency fund

As a rule of thumb, aim to cover your essential expenses for between three to six months, or what you can afford. You should be ready cover bills like energy, your mortgage, rent, travel and food costs, so should the unexpected happen, you’ll be prepared. And you’ll know exactly how much money you need to keep in cash (which can be impacted by inflation), so you can start saving any extra income in more inflation-proof ways.

Tip 2: Get the best interest rate you can on your savings

Make sure that any cash savings you have are receiving the highest interest rate possible. These days you can switch savings accounts and ISAs relatively easily. But if you do find a higher rate, remember that they can quickly go down. For example, it’s common for Cash ISAs to offer high rates for the first year. Those rates can then drop dramatically after the first year. So always set a reminder to keep an eye on any new savings rates you find.

Tip 3: Think about investing your money or topping up your pension to beat inflation

It’s important to be aware of the long-term impact on pension contributions, alongside the compounding effects of investing. Consider topping up your pension, or investing in a Stocks & Shares ISA. Its understandable you may feel unsure about the future at this moment in time, but the key thing to remember is that investing is for the long term.

With time on your side, you can balance out the ups and downs of market volatility and economic uncertainty. And once you have an emergency fund in place, investing your money is one of the best ways to beat inflation. By investing your money, you can grow your wealth while preserving the value of your money.

Source data:
[1] Opinium survey of 2001 UK adults in the UK conducted between 4th and 8th February. The 10.3 million savers refers specifically to cash ISA savers.
[2] This is based on 10,303,247 Cash ISA savers with median savings of £7,231 stalling their investment decision. The total savings amount is projected over 5 years at a Cash ISA rate of 0.26%, allowing for a 6%, 7% and 8% rate of inflation per annum. This results in an erosion of value of £18 billion, £21 billion and £23 billion over a five year period.
[3] Average interest rate for instant access cash ISAs: https://www.which.co.uk/news/2022/01/a-month-on-from-the-base-rate-rise-have-savings-rates-improved/

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

Book your FREE, no obligation discussion today. Schedule Appointment

Sign Up to our mailing list - Receive regular news, tips and financial commentary from the Gemini Team.

Latest News

  • Early retirement typically signifies reaching financial autonomy before the statutory pension age, usually in the mid-60s. In the United Kingdom, retirees can begin drawing their State Pension at age 66. However, this retirement benchmark is set to increase to age 67 by 6 April 2028. [...]

  • Disability significantly affects the financial planning of nearly a third of disabled individuals. This was the key finding of a report that highlighted the additional financial burdens people with disabilities in society suffer. [...]

  • Over recent years, our comprehension of the climate crisis has significantly transformed. Countries and organisations are becoming increasingly ambitious with their net zero targets, while many individuals are making lifestyle alterations to reduce their household carbon emissions. However, some remain oblivious that pensions represent one of our most potent tools for making substantial strides towards net zero. [...]

  • As we approach the end of the current tax year on 5 April 2024, it’s an opportune moment to examine both your personal and business finances to ensure they are structured to optimise your tax efficiency. Despite the ongoing freeze on many tax rates and thresholds, numerous strategies remain for organising your financial matters tax-efficiently. [...]

  • Diversifying your portfolio places you in an advantageous position to seize opportunities across various investments as they emerge. This strategy usually results in a smoother investment journey. But how? The answer lies in the balancing act that diversification encourages. Investments that appreciate in value can offset those that are underperforming. [...]

  • Once a concern only for the very affluent, Inheritance Tax (IHT) is now an issue for many ordinary families, who may find themselves handing over an unprecedented portion of their estates to the taxman. This shift results from years of house price growth, inflation and stagnant tax thresholds. The Office for Budget Responsibility anticipates that IHT will bring in £7.2 billion in the fiscal year 2023/24. [...]

  • Investment scams are a rising concern, promising potential investors the allure of making a significant amount of money swiftly and effortlessly. These scams often involve minimal to no risk investments in various areas such as financial markets, property, cryptocurrencies, and precious metals and coins. [...]

  • Entering into marriage isn't done with the expectation of it ending in divorce, yet this distressing and strenuous event can be a reality for some. Managing finances may not be your immediate concern during such an emotional upheaval. However, obtaining professional financial advice can aid in safeguarding your future financial stability and preserving your wealth. [...]

  • In the challenging realm of parenting, an unexpected yet invaluable source of support has emerged – our parents and grandparents. Over the past 12 months, almost 42% of these seasoned family members, affectionately termed the 'Bank of Family', have assisted younger relatives with childcare. [...]

  • Living to the ripe old age of 100 could require an additional £260,000 in pension wealth to ensure a comfortable retirement, compared to someone living until the current average life expectancy, according to the Office for National Statistics (ONS)[1]. [...]

  • Transparency is the foundation of any strong relationship, which holds true regarding financial matters. It is easy to fall into the trap of assuming that you and your partner have similar financial habits and attitudes. [...]

  • Early retirement typically signifies reaching financial autonomy before the statutory pension age, usually in the mid-60s. In the United Kingdom, retirees can begin drawing their State Pension at age 66. However, this retirement benchmark is set to increase to age 67 by 6 April 2028. [...]

Gemini Wealth Management Ltd is Authorised and regulated by The Financial Conduct Authority Registered in England & Wales No. 5919877 Registered Office: Gemini House, 71 Park Road, Sutton Coldfield, West Midlands B73 6BT The Financial Conduct Authority does not regulate tax and trust advice, will writing and some forms of buy to let mortgages. The guidance and/or advice contained in this website is subject to regulatory regime and is therefore restricted to those based in the UK.

Website by Mellow Marsh Software
© Gemini Wealth Management Ltd
Important Documents | Cookie Policy