Discover why some savers have lost value in cash deposits and four practical moves to help protect your nest egg
The latest analysis from Moneyfacts, published in the journal Interest, shows that many people putting money into bank accounts have seen the purchasing power of those deposits fall. Based on comparisons since 2026, an average easy access cash account could have left savers about 19p per £1 worse off in real terms.
Even when looking at the most competitive easy-access deals, the calculations suggest a potential reduction of around 5p per £1 in real value. These figures underline how inflation and low interest rates combine to erode savings when returns do not keep pace with rising prices.
Heightened global tensions and recent disruptions have pushed inflation risks back into the spotlight, creating fresh uncertainty over household budgets. That backdrop makes it more urgent for people to review their savings choices so their cash works harder. While some products have outperformed the pack—for example, top one-year fixed-rate accounts may have slightly improved purchasing power by about 1p per £1—many ordinary depositors have seen progress undermined by prolonged low rates.
The situation highlights the importance of comparing offers regularly and understanding the difference between nominal returns and real returns.
How much value was lost and what the numbers mean
The headline estimates are stark: up to 19p per £1 lost using average easy-access comparisons, and around 5p per £1 lost even if savers used top-paying easy-access accounts. By contrast, locking funds into the best one-year fixed-rate accounts could have left savers about 1p per £1 better off. The term real terms used in the analysis means the purchasing power of money after adjusting for price rises; a nominal interest rate that appears positive can still leave a saver worse off if inflation outstrips that rate. These broad figures are meant to illustrate the erosion many households have experienced rather than to replace personalised financial advice.
Why cash returns lagged and the expert perspective
According to Adam French, head of consumer finance at Moneyfacts, the shortfall stems from a multi-year gap between low deposit rates and the rise in consumer prices. He argues that rates were historically suppressed through the 2010s and were slow to respond when inflation surged in the 2020s. That mismatch left many savers with negative real returns, reducing the sense of financial security for households that rely on cash buffers. Prolonged negative real returns can discourage spending or investment because people feel their savings are slowly losing value.
How to respond: practical steps for savers
Bag best rates, not average ones
One of the most immediate actions is to focus on the highest paying accounts rather than relying on illustrative averages. The gap between the average and the market-leading best buy products can be substantial, and moving from an average easy access account to a top-rate alternative can materially reduce erosion. Regularly reviewing account rates and being prepared to switch if better offers appear is a simple but effective discipline; small improvements compound over time and can help arrest steady losses of purchasing power.
Blend easy access with fixed-rate accounts
Splitting cash between different types of accounts can balance liquidity and yield. Keep a short-term emergency fund in a readily accessible account for unexpected costs, while considering locking a portion of savings into competitive fixed-rate or notice accounts to secure higher returns. This approach aims to maintain immediate access to funds without exposing the entire nest egg to continuously low rates, and it can smooth the impact of rate fluctuations across a portfolio of deposits.
Make the most of the ISA wrapper
Using an ISA to shelter interest from tax is another straightforward way to improve net returns. For savers with sizable balances or higher marginal tax rates, shielding earned interest can meaningfully reduce the drag on real value. Even small tax savings add up over time and narrow the gap between nominal yields and the effective after-tax return that matters to household budgets, so taking full advantage of available ISA allowances can be worthwhile.
Consider other options where appropriate
For those with longer time horizons and a tolerance for risk, a stocks and shares ISA may offer higher potential returns than cash, though values can fall as well as rise. Assessing personal risk tolerance, investment timescale and financial goals is vital before reallocating cash into markets. Diversification—mixing cash, fixed returns and investments—can help manage volatility while aiming to protect or grow purchasing power in an era when plain deposit accounts have often failed to keep pace with inflation.
In short, savers face an environment where inflation can quietly erode value if returns remain stagnant. Regularly reviewing accounts, combining accessibility with locked rates, using an ISA where suitable and considering well-judged investment options form a realistic toolkit to help preserve purchasing power. Speaking to a regulated adviser can also help tailor these steps to individual circumstances and avoid unintended risks.
