Lendy: Savers missing out on £27bn of returns due to inflation

UK SAVERS could lose £26.5bn over the next year as inflation eats into capital in low-interest savings accounts, according to new research from Lendy.

The peer-to-peer property platform claims that savers collectively receive just £10.06bn of interest on the £1.3trn they are putting away, based on the current average interest rate on zero and low-interest bank accounts of 0.77 per cent.

However, with inflation hovering around three per cent, savers are losing £36.6bn in interest, the research showed. By subtracting interest currently earned, this equates to £26.5bn lost to low interest rates and inflation.

Read more: Strain on households persists as inflation holds steady

Lendy added that banks may not pass on the Bank of England’s 0.25 per cent interest rate rise – its first rate hike in a decade – to savers in full.

Read more: Inflation and interest rates worry investors more than Brexit

“The amount savers are losing is staggering, even when the impact of the recent interest rate rise is taken into account,” said Liam Brooke, co-founder of Lendy.

“Savers may well not feel the effects of this directly, with many banks unlikely to pass the interest rate rise on in its entirety. Savers need a Plan B to beat inflation, looking at alternative ways to retain and grow the value of their capital.

“Clearly P2P investments are in a different league to savings – with a very different risk/return profile. However, even allocating just a relatively small proportion of a portfolio to such potentially high-yielding investments could act as a buffer against inflation erosion, provide all-important diversification and help drive returns.”

Read more: Cash ISA savers left £4bn short by inflation