Britons saving two thirds less than last year as inflation rises

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The amount Britons are savings appears to be falling dramatically, according to the latest analysis by Paragon Bank.

The amount people saved in June this was year fell by two thirds compared to the previous year as Britons struggled to cope with rising living costs.

Savers squirreled away just £400million in accounts with CACI member banks, which represent more than 30 leading savings providers, from May to June 2022. It means that the total held in such accounts reached to £995.1billion.  

But the amount saved is much less than in the same period last year. Between May and June 2021, the same savings providers took in more than £1.2billion.

The decline in savings growth coincided with the UK economy contracting by 0.1 per cent between April and June and rising inflation. In June, CPI inflation sat at 9.4 per cent and it is now at 9.9 per cent. 

The data also suggests that many Britons may be failing to keep an adequate rainy day fund – easily accessible money which acts as a financial cushion to deal with unforeseen events.

Some personal finance experts believe that a rainy day pot should cover between three to six months worth of basic living expenses. Others suggest you keep the equivalent of at least three months of your take home salary.

However, as of June, roughly half of easy-access savings accounts held £500 or less, according to CACI data, with 37 per cent holding £100 or less.

Derek Spawling, Paragon Bank’s savings director, said: ‘June’s CACI data provides further reason to believe that savings growth is becoming more challenging.

‘Inflation is starting to hit home, and further energy price rises are only going to put increased pressure on household budgets.

‘Given these conditions, it is imperative that savers do what they can to protect the value of their savings and find the best rates and products, including Isas, available for their circumstances and to look beyond high street providers.’

Paragon’s analysis did detect one silver lining, in that fewer savers are holding their cash in accounts paying next to nothing in interest.

It found the overall amount held in easy-access accounts offering interest rates of 0.1 per cent or less fell by more than 20 per cent between May and June, from £303.8billion to £242.6 billion.

Spawling added: ‘While our analysis continues to find a decline in the overall value of savings held in accounts offering less than 0.1 per cent interest, that there is over £242 billion not being put to best use demonstrates that there is more that savers could be doing to help meet price rises – and I urge them to take proactive steps to protect their savings.’

What are the best savings rates?

This is Money’s independent best buy tables are a hive of activity at the moment. There are new best buys announced on a weekly basis.

Some savers will be nervous about stashing their money with lesser-known banks, however, it is important to be aware that all savings providers included on our best buy tables come with FSCS protection.

This means deposits made with each provider are protected up to £85,000 per person, or in the case of joint accounts, up to £170,000.

The best easy-access rates are offered by Al Rayan Bank and Gatehouse bank paying 2.1 per cent and 2 per cent.

Both accounts are online only and can be managed via downloading each provider’s app on a smartphone.

For those prepared to lock their money away for a period and surrender access, a fixed rate savings deal will provide more lucrative.

The best one-year deal is currently offered by BLME paying 3.4 per cent, whilst the best two-year deal, offered by Close Brothers, pays 3.55 per cent.

Savers who would rather avoid setting up multiple accounts with different savings providers should consider using a savings platform.

Savings platforms partner with a number of providers and allowing savers greater choice, but all from one platform. Although they are not whole of market, they typically offer rates that are on par with the best.

The savings platform, Raisin, is currently offering some of the most competitive rates.

Raisin* is also currently offering a £30 welcome bonus to This is Money readers, but they must open a new Raisin Account via this link* or any link originating from our website.

It offers savers the chance to boost their savings by £30 when they open and fund an account on its marketplace with a minimum of £10,000.

The best easy-access deal on its platform is paying 1.85 per cent*, whilst the best one-year deal is paying 3.3 per cent*.

Someone depositing £10,000 in either account could effectively boost their rate to either 2.15 per cent or 3.6 per cent, after the £30 bonus is included.