Published On: Mon, Nov 14th, 2022

Inflation pain as cash ISAs eroded by £1,087 – ‘a constant foe!’ | Personal Finance | Finance

Recent analysis from Janus Henderson Investment Trusts estimates that there will be a £184billion “hole” in the UK’s savings this year, even after interest income is taken into account. This is a result of the country’s skyrocketing inflation rate which has returned to a 40-year high and is contributing to the nation’s cost of living crisis. A consequence of this is that the typical family’s cash ISA cash ISAs will be eroded by around £1,087.

This £184billion cash ISA erosion is double the previous record set in 2021 and is more than the total value of UK family savings lost to inflation from 2009 to 2020.

As it stands, the Consumer Price Index (CPI) rate of inflation has reached 10.1 percent once again.

According to Janus Henderson Investors, if the UK’s £1.9trillion of savings were evenly spread around the UK’s households, this year’s inflationary erosion would cost every family £6,706.

Without being equally spread, households would lose £1,087 of their cash ISAs after interest income.

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In comparison, Britons who have normal savings accounts will likely lose around £549 instead.

The country’s wealthier households are estimated to have lost tens of thousands of pounds of their savings to inflation in 2022.

Usually, stocks and shares accounts are able to provide savers with an inflation-beating alternative.

However, due to the current economic turmoil, markets have more often lost investors their money.


So far, 2022 is one of only four years in the last two decades in which shares have performed worse than cash savings.

To address the rise in inflation, the Bank of England has raised interest rates to three percent however it has done little to mitigate the detrimental effects.

Financial experts have sounded the alarm as to how inflation has hurt peoples’ savings over the past year.

Dan Howe, the head of Investment Trusts at Janus Henderson Investors, shared why inflation is a “constant foe” for savings accounts.

He added: “Right now, interest rates are on the up and this may tempt savers to keep their money sit in cash, but history suggests their savings will fail to keep pace with inflation, and even more importantly, it shows they are likely to fall far behind stock-market returns over time.

“Over the last 20 years, we have endured periods of great market turmoil, like the global financial crisis or the pandemic lockdown, and yet stocks have still outperformed cash nearly sevenfold.

“Investing early and regularly, no matter how big or small the amount, affords investors a time-horizon that can help them manage the challenges of market shocks.

“Cash is vital for our immediate needs, but it’s an expensive trap for long- term savings.”

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