Britons saving two thirds less than last year as inflation rises

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According to the latest analysis by Paragon Bank, British savings appear to be falling drastically.

The amount people saved in June this year fell by two-thirds compared to the previous year as Britons struggled to cope with the rising cost of living.

From May to June 2022, savers wasted just £400 million in accounts with CACI member banks, representing over 30 leading savings providers. This means that the total in such accounts was £995.1 billion.

But the amount saved is much less than in the same period last year. Between May and June 2021, the same savings providers withdrew more than £1.2 billion.

The decline in savings growth coincided with a 0.1 percent contraction in the UK economy between April and June and rising inflation. In June, CPI inflation stood at 9.4 percent and is now at 9.9 percent.

The data also suggests that many Britons may fail to maintain an adequate rain fund – easily accessible money that acts as a financial buffer to cope with unforeseen events.

Some personal finance experts believe that a pot of rainy days should cover between three and six months of basic living costs. Others suggest that you keep the equivalent of at least three months of your take-home paycheck.

In June, however, about half of easily accessible savings accounts had £500 or less, according to CACI data, and 37 percent had £100 or less.

Paragon Bank savings director Derek Spawling said: “The June CACI data provides another reason to believe that savings growth will become more challenging.

“Inflation is starting to hit and further increases in energy prices will only put pressure on household budgets.

“Given these circumstances, it is imperative that savers do what they can to protect the value of their savings and find the best rates and products, including Isas, available for their circumstances, and to look beyond the major providers.” .’

Paragon’s analysis found one bright spot, which is that fewer savers keep their money in accounts and pay almost nothing in interest.

It found that the total amount in easily accessible accounts with interest rates of 0.1 percent or less fell by more than 20 percent between May and June, from £303.8 billion to £242.6 billion.

Spawling added: ‘While our analysis continues to find a decline in the total value of savings in accounts with less than 0.1 per cent interest, the fact that more than £242 billion is not being used optimally shows that there is more that savers could do to absorb the price increases – and I urge them to take proactive measures to protect their savings.”

What are the best savings rates?

This is Money’s independent best-buy tables are currently a hive of activity. New best buys are announced weekly.

Some savers will be nervous about putting their money in lesser-known banks, but it’s important to know that all of the savings providers listed on our best-buy tables come with FSCS protection.

This means that deposits made with each provider are protected up to £85,000 per person, or in the case of joint accounts, up to £170,000.

The best easily accessible rates are offered by Al Rayan Bank and Gatehouse Bank which pay 2.1 percent and 2 percent.

Both accounts are online only and can be managed by downloading each carrier’s app onto a smartphone.

For those willing to lock up their money for a period of time and relinquish access, a fixed-rate savings agreement will be more lucrative.

The best one-year deal is currently offered by BLME which pays 3.4 percent, while the best two-year deal, offered by Close Brothers, pays 3.55 percent.

Savers who prefer to avoid setting up multiple accounts with different savings providers can consider using a savings platform.

Savings platforms partner with a number of providers and offer savers more choice, but all from one platform. While not the whole market, they typically offer rates comparable to the best.

Raisin savings platform currently offers some of the most competitive rates.

Raisin* is also currently offering a £30 welcome bonus to This is Money readers, but they need to open a new Raisin account from this link* or a link that comes from our website.

It offers savers the chance to increase their savings by £30 when they open and fund an account in its marketplace with a minimum of £10,000.

Best easily accessible deal on its platform pays 1.85 percent*, while the best one-year deal pays 3.3 percent*.

Someone who deposits £10,000 into either account can effectively increase their rate to 2.15 percent or 3.6 percent, once the £30 bonus is included.