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 ten (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 (ISAs) 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.

3 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. For example, 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. It’s 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.

Truly understanding your vision

Financial planning is a journey that spans your entire lifetime and it centres around where you are now, where you want to be and your values. Your financial plan is the roadmap that gets you there, and it can only be created once we truly understand your vision. For more information about how we can help you, please contact us.

Source data:

[1] Opinium survey of 2,001 UK adults in the UK conducted between 4–8 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 five 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] As at January 2022, 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

INVESTORS DO NOT PAY ANY PERSONAL TAX ON INCOME OR GAINS.

TAX TREATMENT VARIES ACCORDING TO INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE.

STOCKS AND SHARES ISAS INVEST IN CORPORATE BONDS; STOCKS AND SHARES AND OTHER ASSETS THAT FLUCTUATE IN VALUE.

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

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

  • Just two out of five have planned for inflation in retirement Retirement planning can be complex at the best of times, so it is easy to understand how some people can find it daunting to take into account factors like inflation. The reality is that inflation hurts everyone, but it can be especially harmful to retirees. [...]

  • What’s the right emergency fund amount for you? An emergency fund is money you put aside to cover a financial shock. This could be losing your job, or a large, unexpected expense. Building an emergency fund can help prevent your needing to borrow money or make difficult financial decisions in those moments, by giving you savings to fall back on. [...]

  • 3 tips to maintain your financial wellbeing The rising cost of living is one of the most pressing issues facing many families today. The price of food, energy, fuel and other necessities has risen significantly in recent months. This has made it difficult to make ends meet and has put a strain on many household budgets. [...]

  • How to maintain your financial wellbeing As interest rates continue to rise, there are a few things that you can do to make sure your personal finances remain in good standing. It is always important to remain on top of your finances, but especially during times of rising interest rates, as many people start to feel the squeeze. [...]

  • Inflation, political and general economic impacts There are a number of factors to consider when deciding whether or not to delay your retirement. Inflation is one important factor. Over time, the purchasing power of your money can decrease significantly, making it harder to maintain your standard of living in retirement. [...]

  • 1 week ago

    What investors need to know The global stock markets can be highly volatile, with wide-ranging annual, quarterly, even daily swings. Although this volatility can present significant investment risk, when correctly harnessed, it can also generate solid returns for shrewd investors. [...]

  • What really important retirement questions should you be asking? As you approach the last five years before your retirement, there will be a lot of things to consider. You’ll need to think about your finances, your health, your housing situation and your plans for the future to live comfortably in retirement. [...]

  • No one-size-fits-all answer to this question When is the right time to retire? There’s no one-size-fits-all answer to this question – it depends on your personal circumstances. However, there are a few things to consider that may help you decide when the right time for you is. [...]

  • Planning for your wealth preservation and the eventual transfer of that wealth When you’ve worked hard and invested carefully to build your wealth, you want to look after it. That’s why it’s important to plan for your wealth preservation and the eventual transfer of that wealth. [...]

  • Planning for your wealth preservation and the eventual transfer of that wealth When you’ve worked hard and invested carefully to build your wealth, you want to look after it. That’s why it’s important to plan for your wealth preservation and the eventual transfer of that wealth. [...]

  • 10 practical steps to ensure your money is working hard for you In these uncertain times, it’s more important than ever to make sure your finances are in order. The Bank of England believes that a painful squeeze on our living standards, driven primarily by soaring energy prices, is set to intensify and will push the UK economy into recession later this year. [...]

  • 3 weeks ago

    More than half ignore medical advice and work despite poor health due to financial worries When you are off work due to an illness or injury, worries about how you are going to pay your bills can make an already stressful situation worse. So much so that many people are finding themselves in the very difficult position of having to put the need to earn money over their health by continuing to go to work, even when advised not to by a doctor. [...]

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
Privacy Notice | Cookie Policy