UK savers lost £17bn last year, all thanks to…

Ten points if you guessed correctly: Inflation.

New data from Fidelity International shows that UK savers who kept their money in accounts paying below-inflation rates of interest, saw their money lose a staggering £17bn in ‘purchasing power’ during 2025.

‘Purchasing power’ means how much your money can buy. If prices are constantly rising, but you keep your savings stuffed under your mattress, not earning a penny in interest, by the time you come to spend it, you can no longer buy as much with that money as you once could.

Many people don’t factor in inflation when looking at rates of interest on offer from banks and building societies. If you put £100 into a savings account at the beginning of 2025, and your bank promises to pay you 2.5% interest on that £100 while it’s in the savings account, you might think, “great, I’m getting £2.50 for free, just for keeping my £100 in that account all year long.”

However, if inflation means that the price of the goods you buy has risen by 4.5% by the end of the year, your money has actually lost 2% of its original value.

Fidelity, who ran the research, estimates that UK savers earned around £45.6bn in interest in 2025 – an average return of 2.43%. Once inflation is taken into account, however, the real value of cash savings fell by about £17.6bn over the year.

Fidelity estimates that if just a quarter of UK household cash savings had been invested instead of left in cash, the real value of that money could have increased by around £44 billion, even after accounting for inflation. That’s a staggering statistic.

What would you need to earn in interest to beat inflation?

Average UK inflation from January – December 2025 was 3.37%. It peaked at 3.8% in July, August and September. So, to ensure your money didn’t lose real-world spending power, you’ll have needed a savings account that was at least matching those rates. Of course, the goal is to make a return on your idle cash, so ideally you’d be receiving 4% or more.

What to do now

If you have cash savings, check what rate of interest your account provider is paying you.

Official figures on this January’s inflation rate are due from the Office of National Statistics on February 18th. But preliminary estimates suggest it was approximately 3.3%.

If your current provider is not beating inflation, you are losing money and it is time to swap!

All the providers we currently have listed on our Best Cash ISA page are currently paying above 4.00%.

Alternatively, consider investing the money instead. Investing is only suitable for money you won’t need for emergencies as you should ideally leave money invested for at least 5 years. But, if you have spare cash that can be put away for the longer-term, returns on investments typically beat returns on cash by some distance. The FTSE 100 (a stock market index of the UK’s 100 largest publicly listed companies) grew by 21% in 2025. That’s not a guarantee that all your investments would grow by the same amount, and all investing involves risk, but history shows the stock market is the most effective way to grow money over the long-term.

Here are our top picks for an investment ISA: Best Stocks and Shares ISA

And if you’re new to investing, check out our ‘Best Stocks and Shares ISA for Beginners’ guide.