The amount of money held in cash savings accounts has fallen by more than 20 per cent since March this year, new research from Investec Private Bank has found.
A combination of a plummeting base rate and the rising cost of living has forced consumers to reduce the amount they hold in cash savings, Investec's latest Savings Monitor has revealed, with the average amount held in savings falling by 22 per cent since the base rate hit a record low of 0.5 per cent in March - from around £18,000 to £14,000.
Following several successive base rate cuts, UK adults had less than a third of their assets in savings and other liquid assets in March this year, and this has now fallen even further to 27 per cent.
A cautious one in five adults in the UK have more than half of their assets in cash savings accounts, which could be attributed, in part, to savers looking for a safe haven for their money amid volatile stock market conditions.
According to Investec's Savings Monitor, Brits are also unable to save due to the rising cost of living, lower levels of disposable income, and paying off their non-mortgage related debt.
Investec estimates that four million UK adults have £25,000 or more in cash savings accounts, but the bank is concerned that 36 per cent of all savers – nearly 13 million Brits – do not know what interest rate their money is earning and they could be losing out on valuable returns.
The average savings account rate is currently 0.95 per cent, but savers who have their money in the Investec High 5 account could be earning as much as 3.35 per cent – 2.85 per cent above the base rate.
Linda McBain, head of banking at Investec Private Bank said that as circumstances have combined to make it a difficult environment for savers, but those with cash savings should make sure they are getting the best rate possible.
She warns that "these savers could be missing out on higher rates of interest by leaving their cash in accounts paying derisory rates, sometimes well below the base rate."
"Those savers with larger deposits should switch to accounts paying a consistently competitive rate of return if they want to avoid missing out on hundreds of pounds in interest each year," Ms McBain continued.
"For instance, our Investec High 5 account which always tracks the average rate of the top five best-buy accounts, which means that savers can avoid moving their cash to accounts which make short-term rate promises."
The interest rate for the Investec High 5 Account is set independently by Moneyfacts, which takes an average from the five highest savings accounts rates each week, guaranteeing that the rate will always be competitive, and does not rely on bonus rates.
© Fair Investment Company Ltd