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The ‘False Sense of Security’ in Cash Savings

ended 27. April 2026

After a period of improved interest rates, many savers are feeling more comfortable holding larger cash balances — but is that confidence misplaced? With inflation and tax still quietly eroding real returns, there are growing concerns that cash may be giving a false sense of security.

Scott Gallacher of Rowley Turton says: “Cash feels safe because the value doesn’t visibly fall, but in real terms many savers are at best treading water. What looks like progress on paper can often be little more than standing still once inflation and tax are taken into account.”

We’re looking for expert views on the following:

  • Are savers becoming too complacent about holding large amounts in cash?
  • How significant is the impact of tax on savings interest, particularly for higher-rate taxpayers?
  • Is inflation still a meaningful threat to real returns despite recent improvements?
  • At what point does holding excess cash become a risk rather than a safe option?
  • Should more savers now be reconsidering the balance between cash and long-term investments?

2 responses from the Newspage community

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Editor
Scott GallacherVerified
Director at Rowley Turton
People often mistake certainty for safety when it comes to cash, overlooking the steady erosion caused by inflation. The value may not fall on paper, but in real terms purchasing power can quietly slip away. Add tax into the mix, and many savers are making far less progress than they think. What feels secure today may prove costly over the long term.
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Editor
Philly PonniahVerified
Chartered Wealth Manager and Financial Coach at Philly Financial
Cash can feel safe, but too much of it can make people poorer. The number on the statement may not fall, but inflation and tax can eat into what that money can actually buy. This is especially true for higher-rate taxpayers, who only get £500 of savings interest tax-free, while additional-rate taxpayers get no personal savings allowance at all. So a headline savings rate can look attractive, but the after-tax return may be much weaker. Cash is still essential for emergency funds and short-term goals. The risk comes when people treat it as a long-term wealth strategy. If money is sitting in cash for years, not months, savers need to ask whether it is protecting them or simply standing still while prices rise. More savers should be reviewing the balance between cash and investing, not because cash is bad, but because it has a job. Once that job is done, long-term money usually needs a better plan.