UK Savers Are Sitting on Trillions – But Their Money Is Quietly Shrinking

With inflation lingering and interest rates falling, experts warn that idle cash in UK savings accounts is steadily losing value – costing households real money and raising urgent questions about what to do with money sitting in the bank.

Inflation Is Outpacing Savings 

UK households are now holding close to £1.9 trillion in cash deposits, according to the Bank of England’s May 2025 Money and Credit report. While the report provides monthly data, this total is based on accumulated figures over recent quarters — reflecting a sustained build-up in savings across current and deposit accounts.

Meanwhile, inflation continues to outpace these savings. The Office for National Statistics reports that in May 2025, the Consumer Prices Index (CPI) rose by 3.4% year-on-year, highlighting how cash held in low-interest accounts is losing real-world value.

So, what should you do with idle savings? Here are the top strategies to stop your money from going backwards.

Consider Investing – Even in Uncertain Times

Investing remains one of the most effective ways to grow wealth over the long term. While it carries more risk than saving, it also offers far greater potential for inflation-beating returns.

Popular options include:

• Stocks and Shares ISAs – UK residents can invest up to £20,000 annually tax-free. 
• ETFs and Mutual Funds – Offer diversification and lower risk for beginners. 
• Bonds – Government and corporate bonds deliver stable interest income. 
• Pensions (SIPPs) – Boost retirement savings with generous tax relief. 

Even small, regular contributions benefit from compound growth over time. And if you’re unsure where to begin, you can visit Rankia, which offers expert-backed investing guides and broker comparisons tailored to UK investors.

Explore High-Interest Savings or Fixed-Term Accounts

If you’re not ready to invest, moving your money to a high-interest savings account is a smart step. Some digital banks now offer rates over 4% — well above most traditional banks.

You might also consider:

• Fixed-rate savings accounts – Lock in higher rates for 6 months to 5 years. 
• Notice accounts – Offer better interest if you can wait 30–90 days to withdraw. 

Clear High-Interest Debt First

Before investing, it may make more financial sense to pay down high-interest debt, like credit cards or personal loans. Many credit cards charge APR rates of 20% or more.

Paying that off is like achieving a guaranteed return — far higher than any savings or investment account can offer.

Even overpaying your mortgage, if allowed by your lender, can reduce total interest paid over time and free up cash flow later.

Build or Strengthen Your Emergency Fund

If you don’t have an emergency fund, now’s the time to prioritise one. Experts recommend setting aside 3–6 months of essential expenses in an easy-access savings account — available for job loss, medical bills, or unexpected costs.

This financial safety net can help prevent reliance on high-interest debt or dipping into investments during market downturns.

Why Investing Typically Beats Saving Over Time

Over the long term, stock market returns have historically outpaced both inflation and cash savings. The FCA notes that despite common fears, the number of first-time retail investors is rising — and digital platforms are making it easier than ever to start small.

Even investing £50 per month in a diversified portfolio can grow substantially over 10+ years thanks to compound returns.

Bottom Line

Keeping some cash in the bank for emergencies makes financial sense — but parking large sums in low-interest accounts could quietly cost you thousands over time. With inflation still outpacing most savings rates, the real value of your money is steadily eroding.

Whether you’re aiming to build wealth, preserve long-term value, or retire comfortably, now’s the time to rethink your strategy. From tax-efficient ISAs to government bonds and debt reduction, there are smarter, inflation-beating alternatives to leaving your money idle.