Savings choice hits record high but expert warns: "You are not saving money by having it in a savings account"

SAVINGS choice has hit a record high but interest rates are falling as experts warned about keeping your money stagnant in accounts, new research has revealed.

Moneyfacts UK Savings Trends Treasury Report data shows the quantity of savings providers on the market and product choice have hit new record highs, including cash ISAs. 

Product choice overall rose month-on-month to 2,274 savings deals, a record high.

The choice of cash ISAs rose to 648 deals, a new record high and its seventh monthly rise. The number of savings providers overall rose to 154, up from 152 last month.

But average rates now all sit below 4% for the first time since April 2023. The average savings rate fell to 3.50%, down from 3.51% month-on-month. 

It is down from 3.92% since August 2024, and lower than 4.14% in August 2023. The rate was last above 4% in January 2024.

David Belle, Founder and Trader at Fink Money, said keeping money in cash is not the way to boost your wealth.

He said: "We have lost half a trillion sterling in wealth from 2013 til 2023 due to cash being kept in cash ISAs and out of the equity market. If I were Chancellor, I would shift the tax free allowance on cash ISAs to S&S ISAs. 

"Encourage people to either buy more UK equities or make money from overseas equities and repatriate the wealth. The cash ISA is inextricably linked to the property market as people desperately don't want to risk their precious house deposit cash, which creates completely dead money from start to finish. 

"You are not saving money by having it in a savings account, you are simply subsidising poor use of capital and validating the government's view that investing is high risk, when the lack of investing is the bigger risk."

Benjamin Beck, Money Coach at Beck Money Coach, said Brits with cash that they don't need to access for five years can invest.

He said: "It's a positive trend that product and savings choices are increasing. It helps the market be competitive and savvy savers can find better deals. The fact that rates are falling whilst inflation keeps rising means that your money is likely losing value in real time if your interest rate doesn't outpace inflation. 

"Whilst using accounts with a reasonable interest is the priority for many, they should be encouraged to consider investing if they have a solid emergency fund and don't need to access the funds for at least five years."

Kundan Bhaduri, Entrepreneur and Landlord at London-based The Kushman Group, said inflation is eroding savings.

He added: "The savings industry has mastered the art of offering infinite choice in a market designed to fleece customers. There's shockingly 2,000+ ways to lose money to inflation, each wrapped in marketing. 

"This explosion in product variety is pure theatre, designed to distract savers from the uncomfortable truth that their diligent accumulation is being systematically pickpocketed by monetary policy. The institutions celebrating record choice are the same ones paying rates that guarantee wealth destruction for anyone foolish enough to believe cash is still king. 

“Smart money fled savings accounts years ago when it became obvious that central banks had declared war on prudence. While pensioners celebrate their pathetic ISA rates, property investors collect rental yields that actually exceed inflation plus capital growth that compounds wealth rather than erodes it.”

Keith Budden, Managing Director at Liss-based Ensurety, said the record amount of products isn't necessarily positive news.

He continued: “Savings rates will always be low while the Bank of England base rate is low. The base rate in that sense is always a double edged sword, put it up and borrowers suffer (particularly mortgage holders), put it down and savers suffer - and thus it was ever so. 

"I'm not sure how to interpret the increased number of savings products, on the one hand you can say it increases consumer choice, on the other hand are the financial institutions simply rewrapping an existing product, giving it a new sexier coat of paint, because they are desperate to attract savers, as ultimately that gives them more money to lend or invest in bonds etc, the difference between the two being how they make their money themselves. 

"A note of caution on the repaint strategy, be sure the underlying product is good, because however much you polish a turd, it's still a turd.”