‘As Rachel Reeves targets our Cash ISAs – now savers face an even bigger threat’

Savers are losing billions in interest on their deposits every year and this time they can’t blame Labour. Because it’s all their own fault.

With a little effort, it’s possible to get more than 4.5% from Cash ISA or standard non-ISA savings account.

But too many of us aren’t making that effort. And we’re losing billions of pounds as a result.

Savers have a staggering £277billion worth of bank and building deposits earning no interest whatsoever.

That’s a record high, having jumped 20% from £231billion one year ago, new research from CapitalRise shows.

These are huge sums that savers simply aren’t putting it to work, despite the cost-of-living crisis.

Banks can’t believe their luck and aren’t in a hurry to alert customers to the danger. That’s because they’re making a fortune from savers’ inertia.

It’s no good moaning about Reeves threatening our savings, if we’re not making full use of them ourselves.

Savers can’t blame the Bank of England (BoE) either.

Cash paid next to nothing for more than a decade after the financial crisis, thanks to the BoE slashing base rates to 0.1% in March 2009.

Yet today bank rate is relatively high at 4.5% and some market-leading accounts pay more.

The Chip Instant Access Account offers 4.58%. Charter Savings Bank pays 4.57%.

Someone who put £10,000 into the Chip account would get £458 of interest in a year. Yet many can’t be bothered.

Which is strange given that millions are struggling for every penny right now.

Both the Chip and Charter rates are available on deposits starting at £1. A saver with £25,000 can get 4.75% from Monument Bank.

All these are easy access rates and may fall next time the BoE cuts base rates.

For those seeking longer-term security, RCI Bank pays 4.60% a year for two years on a minimum £1,000 deposit.

Hampshire Trust Bank’s 5-Year Online Fixed Saver pays 4.27% a year on deposits starting from £1.

That’s a lower rate but is guaranteed right through to 2030. Regardless of what the BoE does.

A £10,000 deposit would grow to £12,325 in that time. So that’s a potential £2,325 a saver could be losing due to their own inertia. It all adds up.

Uma Rajah, chief executive of Innovative Finance ISA provider CapitalRise, warned if savers get no interest on their deposits, the value of their money is actually falling in real terms.

“Those who keep funds in these accounts will ‘lose’ around £5.6billion over the next year as inflation erodes their value.”

This assumes an average inflation rate of 2.6%. The loss could be greater, with inflation now at 3% and potentially heading towards 4% this summer.

And that’s on top of the interest sacrificed. If savers got 4% on that £277billion, they’d get £11billion in annual interest.

Everyone needs some cash in an instant access account, but don’t overdo it. That’s simply throwing money away.

With Reeves considering slashing the Cash ISA allowance to £4,000, it’s vital to use as much of today’s £20,000 limit as you can. While you’re at it, grab the maximum interest rate you can.