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Inflation wipes out £1,400 in real-term losses, research finds

ended 20. May 2026

Over the past five years stubborn inflation has eroded savers’ pots by around £1,400, and they could face a similar fate in future if price pressures continue, Moneyfactscompare.co.uk analysis can reveal.

The Consumer Price Index (CPI) fell to 2.8% during April, from 3.3% in March.

The Moneyfacts Average Savings Rate currently sits at 3.55%, which is higher than inflation, meaning savers can get real returns on their cash but it’s still important to shop around for the best rates.

There are currently 1,806 savings accounts that beat inflation. In May 2025, there were 1,326 deals that could beat CPI which was then at 3.5% (April 2025 CPI) and in May 2024, there were 1,558 deals that could beat CPI which was at 2.3% (April 2024 CPI).

Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk, said: “Locking in savings rates has not shielded households from inflation, and savers who locked into a five-year term in May 2021 at a top rate of 1.40% may have exposed themselves to significant real-term losses. During that time, a £10,000 deposit would now be worth around a modest £10,700, however, with average inflation at around 4.6% per year, its purchasing power would’ve been drastically eroded. In today’s terms, the real value of the investment falls to around £8,600, equating to a real-term loss of around £1,400 over five years."

  • What advice do you have for savers?
  • How can they find the best rate?
  • Are people better off investing in a stocks and shares ISA instead?

Responses asap.

8 responses from the Newspage community

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Philly Ponniah
Chartered Wealth Manager and Financial Coach at Philly Financial
The key is understanding what cash is for, and ensuring it works as hard as possible. For savers, the first step is to avoid leaving large balances in low-interest current accounts. Many banks pay very little interest, so shopping around regularly matters. Easy access accounts, regular savers, and fixed-term bonds serve different purposes; the “best” option depends on how quickly access to the money is needed. For longer-term wealth building, investing becomes increasingly important. Historically, stock markets have outpaced inflation over longer periods, which is why Stocks and Shares ISAs can be powerful for goals 5 years or more away. While investments can fall in value in the short term, they offer greater potential for real growth over time compared with cash alone. The biggest risk for many savers is not market volatility, but staying too heavily in cash for decades and losing purchasing power without realising it.
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Eamonn Prendergast
Chartered Financial Adviser at Palantir Financial Planning Ltd
Cash has a role, but over the long term it rarely keeps pace with inflation — and that’s the real risk for savers.”
“Even if rates look competitive, it’s the real return after inflation that matters, and that’s where many people quietly lose purchasing power. Cash is important for short-term needs, emergency funds and planned spending, but holding too much for too long can erode wealth.

For longer-term goals, investing through something like a Stocks and Shares ISA should be a key consideration. Volatility isn’t a flaw — it’s the price you pay for higher potential returns. The key is having a clear plan based on your goals, time horizon and attitude to risk — and sticking to it rather than reacting to short-term noise.”
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Anita Wright
Chartered Financial Planner at Ribble Wealth Management
The findings underline a quiet truth that cash is not the safe asset many assume. Fiat currencies like sterling are in a long term debasement cycle, with official inflation figures understating the true loss of purchasing power. Government structurally needs inflation to outpace yields to manage debt, meaning savers quietly foot the bill Headline savings rates above inflation offer some relief, but frozen tax thresholds continue to erode net returns. Both cash and stocks and shares ISAs serve different purposes. A layered approach tends to work best, with short term liquidity held in cash and longer term capital positioned for growth within tax efficient wrappers. Tailored planning remains essential.​​​​​​​​​​​​​​​​
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Paul Denley
CEO at Oakham Wealth Management
Inflation is the silent tax many people underestimate. A headline gain means little if purchasing power is falling faster underneath it. Cash absolutely has a role for emergency reserves and short term spending needs, but long term wealth preservation requires thinking in real terms ie after inflation.

The good news is that savings rates have improved, but complacency remains expensive. Savers should actively compare providers, avoid leaving large balances languishing on default bank rates, and make full use of ISA allowances where possible.

For longer term capital, particularly over five years or more, diversified equities have historically provided a stronger defence against inflation than cash alone. The trade off is volatility, which is why time horizon and risk tolerance matter enormously.

Market volatility is often perceived by many as a risk too far. However, over the long term, the slower and less visible erosion of purchasing power can prove more damaging.
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Dariusz Karpowicz
Director at Albion Financial Advice
Cash feels safe right up until you notice how quietly it loses ground. Leave money sitting in a low-interest account and inflation chips away at what it can actually buy, even when the balance on the statement never moves. The first job is matching your money to its purpose. Keep enough easy to reach for emergencies and short-term plans, but think harder about anything you can afford to leave untouched for several years.
For longer goals, investing tends to do more for you than cash alone. Markets rise and fall, and that swing makes people nervous, but it is the cost of stronger growth over time. The real risk for most savers is the opposite of volatility. It is sitting too long in cash and watching purchasing power fade without ever feeling it happen.
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Antonia Medlicott
Founder & MD at Investing Insiders
Not enough people realise that if you have your money in a savings account with a low interest rate, or if inflation is higher than your interest rate, then you are losing money and purchasing power, so it’s important to shop around to stay ahead.

Be prepared to look online for the best rates; the high street is rarely where you'll find them. It’s important to make your money work hard for itself. There are plenty of competitive rates over 4 per cent right now if you want to lock in, so don’t settle for less.

If you feel comfortable, then a stocks and shares ISA usually is the best option, but many are put off by the fear of losing money. Whilst it is true that there are risks with S&S ISAs, over the past decade, the average return on a Stocks & Shares ISA has been around 9.5 per cent, far above inflation figures. Past performance doesn’t guarantee future results, but it makes a significant difference compared to someone receiving 2.8 per cent in the latest inflation figures.
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Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
Beating inflation with cash is really difficult. Inflation is backwards looking as in it's what's happened but the only thing you have any say in is what interest rate you get over the next year. The problem is that you don't know what inflation is going to be this time next year and so you're forever chasing an unknown. The margins between cash and inflation are usually pretty thin whereas if you have the time horizon and the ability to withstand some fluctuation, investments can be a much better approach to trying to protect against inflation.
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Ken James
Director at Contractor Mortgage Services
once you realise that your money is not keeping pace with inflation its a very rude awakening, all you can truly do apart from spend it, is to try your best to shop around, avoid long fixes unless the rate comfortably beats inflation, and consider whether long‑term goals may be better served through a stocks and shares ISA, which can outpace inflation over time but carries investment risk, and thats the thing right now you might need to shift your risk versus reward spectrum to get a better opportunity to increase your value but it is not for the faint hearted given the global picture.