Savings disaster as Britons lose £7bn to ‘silent threat’ inflation despite high interest rates
Fresh analysis from Fidelity International reveals that British savers saw nearly £7billion of their money’s purchasing power vanish during their sleep throughout 2025 despite high interest rates.
The investment firm’s research highlights how a persistent consumer price index (CPI) inflation rate continues to quietly diminish the worth of household savings held in cash.
December’s inflation figure reached 3.4 per cent, climbing from 3.2 per cent the previous month and remaining stubbornly above the Bank of England’s two per cent target.
Meanwhile, typical easy-access savings accounts from high street financial institutions offered just 1.94 per cent interest on average, according to the central bank’s own figures.
Britons have lost billions in savings interest due to persistent inflation, analysts warn
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This significant gap between rising prices and meagre returns meant most those with savings account have watched their money lose ground in real terms, analysts warn.
Concerningly, British households currently hold approximately £1.88trillion in cash deposits, Fidelity’s calculations show.
The firm estimates that around 70 per cent of these savings sit in easy-access accounts, with the remaining 30 per cent in fixed-rate products offering a better average rate of 3.56 per cent.
Based on this split, savers collectively earned roughly £45.6billion in interest over the year, representing an average return of 2.43 per cent.
Has your savings been impacted by inflation?
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GETTYHowever, when measured against the 3.4 per cent inflation rate, the real value of these deposits actually declined by approximately £17.6billion during 2025.
Given that adults typically spend around 38 per cent of their time sleeping, this translates to roughly £122 lost per person during their slumber.
Marianna Hunt, a personal finance specialist at Fidelity International, describes the phenomenon as a hidden danger that savers need to be aware of going forward.
She explained: “Inflation is a silent threat to savers with many people seeing the real value of their cash go backwards.
“With inflation rising again at the end of the year and remaining above target, our analysis underlines how even relatively modest inflation can continue to erode savings when returns on cash fail to keep pace.”
Historical data reinforces the case for considering alternatives to cash. Fidelity’s research examining every rolling 10-year period from 1988 to 2025 found that UK stock investments outpaced inflation 95 per cent of the time, compared with just 58 per cent for cash savings.
Ms Hunt adds that while maintaining three to six months’ essential spending in cash remains sensible, excessive cash holdings risk “quietly losing value over time – potentially undermining long-term financial security”.
The contrast with investment returns proved stark last year.
The Bank of England base rate has fallen | CHAT GPT Global equity markets delivered strong performance, with the MSCI World Index generating approximately 13 per cent total returns in sterling terms during 2025.
Fidelity calculates that had just a quarter of household cash savings, which is around £470billion, been invested instead, the real value could have increased by roughly £44billion after accounting for inflation.
That growth would have continued even during sleeping hours, adding nearly £17billion overnight.
Ms Hunt shared: “When money is invested, it has the potential to keep growing even while you sleep – working in the background while you rest, rather than quietly losing value to inflation.”
