The amount of money sitting in UK accounts not paying any interest was more than £276bn in December last year, new Bank of England data has shown.
The December figure was just below the record of £282bn, set the month before, sparking concerns from experts that investors holding cash in zero interest accounts would see their money eroded by inflation.
Which?, the consumer group, said there could be several reasons why people were leaving their money in non-interest bearing accounts.
“People could want their cash easily accessible for a rainy day or they may not realise the rate has tumbled since they first opened the account,” said Reena Sewraz, a Which? money expert.
“There are some good interest rates available so it’s well worth shopping around and moving providers if your bank isn’t paying interest,” she added.
As of December last year, the average rate on an easy access cash account, with £10,000 in savings, was about 3 per cent, according to Moneyfacts.
Laith Khalaf, head of investment analysis at investment platform AJ Bell, agreed it was “puzzling” that so much money was being held in such accounts when interest rates were so high.
“Back when interest rates were near zero, it wasn’t hugely rewarding to move from an account paying no interest, but that has now dramatically changed,” he said.
Khalaf pointed out that top savings accounts paid more than 4 per cent, saying “many savers could do themselves a huge favour by switching to more competitive accounts”.
Despite calls from experts for consumers to get the best deal for their savings, the amount of money held in non-interest bearing accounts has doubled over the past decade from £135bn, and now accounts for 15.5 per cent of all money held by individuals in accounts and cash Isas in the UK, according to BoE data.
Khalaf warned that those holding money in non-interest bearing accounts would see that eroded over the next year due to inflation, which the Bank of England has projected will hit 3.7 per cent.
“For money held in an account paying no interest, that means every £100 would see its buying power reduced to just over £96 in the course of a year,” he added.
“Even if inflation returns to its target [of 2 per cent], it will still erode the value of money that isn’t growing.”
The Bank’s analysis covered accounts where any cash on deposit can be withdrawn without notice or penalty. It also covered situations where cash was in transit.
Last year, the BoE said reporting issues had meant some savings had been wrongly classified as being in interest-bearing accounts, with £44bn subsequently reclassified as being in zero-interest accounts in the bank’s November 2024 data.
