LOW cash ISA rates and high inflation have left UK savers £3.81bn short, research claims.
Investing platform Willis Owen claims the £270bn held in cash ISAs would be worth £273.5bn based on the average rate in September of 1.013 per cent, but the consumer price inflation rate of 1.03 has reduced this to £278.1bn. This leaves a gap of £4.6bn.
As interest on ISA returns are awarded on an annual basis, Willis Owen estimated quarterly returns on ISAs over the last four quarters and subtracted this from the quarterly values ISAs would need to be based on inflation rates, which came to a total of £15.23bn.
It then divided this figure by four to estimate how much savers would have lost out over the year, resulting in a gap of £3.81bn.
“With inflation now hitting the three per cent mark, significantly below the average return available on a cash savings account at one per cent, cash savers have been left short changed this year,” Jason Chapman, managing director at Willis Owen, said.
“Couple this with low growth in wages and it’s clear why people might choose to spend rather than save.”
Read more: Bank of England urged to delay rate rise
He warned that an interest rate rise next month may not even be enough for cash savers.
“Interest rates may go up to 0.5 per cent in November but for this year’s cash ISA savers, that rise will be too little too late,” he said.
“Savers need to start thinking longer-term and should consider other options, such as investing in the stock market, if they are to keep pace with rising inflation.”
The Office for National Statistics revealed earlier this week that inflation hit a five-year high in September at three per cent, up from 2.9 per cent in August and the highest rate since 2012.