Income from savings accounts collapsed to just 5% of total investment income for UK savers last year, down from 8% the year before*, says easyMoney, the investment platform from Sir Stelios Haji-Ioannou’s easy family of brands.
Income from savings accounts was £5.7bn last year compared to total investment income of £109.7bn for UK savers. Dividends from shares and unit trusts (£83.8bn) represented the majority of total investment income for UK savers last year at 83%, up from 73% the year before. Income from property (£16.2bn) was 15%, a slight fall from 17%.
easyMoney says the low income from savings accounts reflects the poor interest rates savers are receiving. The refusal of banks to pass on recent Bank of England interest rate rises to savers means this trend is set to continue. It is important savers diversify their investments as interest rates on savings accounts are unlikely to generate inflation-beating returns. Savers can lose significant value by holding their savings in accounts which pay interest rates that are lower than the current inflation rate of 1.8%.
Although holding cash in savings accounts is often seen as a safe option, particularly during periods of market volatility, it does mean savers may see their hard earned money eroded by inflation. easyMoney says savers have a wealth of better-performing options available to them. Income from savings accounts as a proportion of total investment income has now fallen for three consecutive years. Actual income from savings accounts has fallen 16% over the last year, down from£6.8bn.
Andrew de Candole, CEO of easyMoney, says: “Savers are becoming increasingly frustrated as income from savings accounts plumbs to new lows. Interest rates on savings accounts and basic cash ISAs are now so low that many savers are redirecting their investments to other assets.”
“Fortunately, there are other income producing options for investors who are willing to take on a sensible amount of risk for higher returns. It is very important to shop around .”
*HMRC data
