Many savings accounts not keeping up with inflation

Almost two in every five savers are earning less on their savings account than the rises in inflation, claims Sainsbury’s Bank.

As the Office for National Statistics revealed inflation is creeping upwards to 3.1 per cent, research by the supermarket bank showed that nearly 40 per cent of savings accounts are earning less than three per cent.

Many people are earning even less, claims the report, with 16 per cent of banks and building societies paying less than two per cent.

Many banks are failing to keep up with rising interest rates. Although the Bank of England has raised the base rate three times since August, to 5.25 per cent, only 21 per cent of accounts offer five per cent or more.

Peter Wood, head of savings at Sainsbury’s Bank, said that many people simply stayed with their account out of inertia, thinking that the rate differences wouldn’t make a difference even though people change electricity or water suppliers over smaller savings.

He added that for customers with £3,000 in the bank, the difference between the lowest interest rate of 1.5 per cent and the 5.5 per cent offered by Sainsbury’s would amount to £100 a year.