Inflation taking a hefty bite out of savings

Savers have lost out on almost £2,500 on average over the past decade because they have failed to protect their money from inflation, it has been claimed.

More than nine in ten people quizzed by Yorkshire Building Society said the impact of inflation on their finances was becoming increasingly evident.

But while most claimed to be cutting their day-to-day spending in a bid to combat inflation, few have taken rising prices into account when looking for a savings deal. The average saver in an easy access account has earned interest of £1,624 since 2001, taking their savings pot to £13,272.

They would have generated a fund of £15,700 if their savings had kept pace with inflation, amounting to a spending power shortfall of £2,428. Only a fifth of those surveyed said they had tried to ensure their savings were not losing too much to inflation, said the Yorkshire.

Michelle Slade, of Moneyfacts, said the impact of inflation on savings is under-appreciated because the actual amount put away continues to grow. “The combination of low savings rates and above target inflation is effectively reducing the spending power of people’s savings,” she said. “Only a handful of saving accounts negate the effects of tax and inflation, so savers really need to shop around.”

Almost half of the savers surveyed said their pay packet doesn’t stretch as far as it used to, while three in ten believe they are having to “spend more to get less”.

With savings struggling to beat inflation, more people are taking other steps to shore up their finances. More than seven in ten savers are using discount codes or vouchers, while 55 per cent are eating out less often and more than a third are taking packed lunches to work.