Inflation costs UK savers almost £2,500 in the last 10 years

With 96% of consumers admitting that they have tried to make their money go further, Yorkshire Building Society reveals that despite the typical cutbacks UK consumers are making, they are not factoring in the impact of inflation on their savings with some losing almost £2,500 in the last 10 years.

As one of the only providers of an inflation-linked product with an ISA wrapper following the withdrawal of NS&I and the Post Office from the market, the Yorkshire takes a closer look at inflation.

As consumers tighten their belts around daily spending, research has showed the top three economies UK consumers are making due to inflation are using vouchers/discounts where possible (72%), buying more supermarket offers (62%) and eating out less often (55%).  In addition, 45% of people are choosing to shop at cheaper supermarkets, 37% taking a packed lunch to work and 34% using their cars less.

While these are all excellent ways in which to cut down on costs, fewer than one in five (19%) people are checking to ensure that their savings are not losing value in real terms.

Sensibly many people are choosing their savings provider based on how financially secure they think they are (37%) - and how easy it is to access their money (46%).  However while 93% of people say that compared to a year ago, they feel the impact of inflation on everyday spending more, just 26% pick this as one of the key criteria when finding a savings account.

With the average savings account standing at £11,648 this can have a significant effect on a person's savings - especially over the long-term given the current market.  Indeed, over 10 years someone with the typical savings pot of £11,648 who had put this in a basic easy access savings account would have earned £1,624 in interest leaving their spending power at £13,272.  However for them to have the same spending power as when they invested - their savings would need to have grown to £15,700 - a difference of £2,428.

With almost half (49%) of consumers admitting that they need to be much more careful with their purchase choices, 39% say their salary does not go as far as it used to and 29% feel they spend more to get less - highlighting how important it is to ensure savings are not eroded.   

Yorkshire now stands as one of the only providers of an inflation-linked account with the option of an ISA wrapper, Simon Broadley from Yorkshire Building Society said: "Most people realise that inflation has a significant impact on their day to day spending and are budgeting accordingly.  However, most people seem to forget that, while it is an excellent idea to save, it is important to ensure that your savings account doesn't lose its spending power and that it keeps pace with inflation. 

"Whilst it is impossible to predict what happens in the future, investors need to be aware of the spending power of their money.  The findings in this research are really interesting as it highlights the fact that many consumers are not looking at inflation when considering their savings options."

Michelle Slade, spokesperson for consumer finance website Moneyfacts, said: "People can see the impact of rising prices on their everyday spending, but neglect to see the impact on their savings as the actual size of their savings pot is still seemingly growing.

"The combination of low savings rates and above target inflation is effectively reducing the spending power of people's savings. Only a handful of saving accounts negate the effects of tax and inflation, so savers really need to shop around to get the best deal. Neglecting to do so could really diminish the value of prudent savers' money."