£280 Billion Sitting Idle: The High Cost of Inaction for UK Savers

May 2025

By Will Glyn

£280 Billion in Zero-Interest Accounts: The High Cost of Inaction

If one figure sums up the UK’s savings apathy, it’s this: £280 billion is currently sitting in accounts earning no interest — despite savings rates now exceeding 5%.

According to the latest Bank of England data (to the end of March), this mountain of idle cash has continued to grow, increasing by £51 billion in the past year alone. This is despite the base rate rising and a range of competitive savings accounts being available.

This inertia is costing the nation billions. Had the £230 billion sitting in zero-interest accounts a year ago earned a modest 3%, savers would collectively be £6.9 billion better off today.

And it’s not just missed returns — inflation is silently eroding the real value of these funds. Although inflation has come down from its peak, it still chips away at spending power. Holding money in a current account or outdated savings account is effectively the same as keeping it under the mattress — though arguably less comfortable.

There’s even speculation in the UK the government may limit Cash ISA allowances to encourage more people to invest. But ultimately, savers need to take the initiative to make their money work harder.

Currently, the top easy-access savings account pays 4.59%. That’s £688.50 a year on £15,000, completely tax-free for most under the Personal Savings Allowance. For those with £50,000 sitting idle, that’s nearly £2,300 in missed interest annually.

Is Investing a Better Option?

While it’s sensible to keep some money in cash for short-term needs, savings beyond that could potentially grow more through investing. Although investing carries risk, it also offers better long-term returns and a stronger defence against inflation.

For example:
• Saving £10,000 at 2% interest would grow to £12,190 over 10 years.
• But if invested with an average annual return of 5% after fees, that same amount could reach £16,289.
• Over 30 years, the difference is even starker:
• £18,114 in cash vs £43,219 invested.

Today’s savings rates are attractive, but they’re variable — and once fixed terms expire, future rates could be lower. That’s why a mix of smart saving and investing is often the best approach.

Six Ways to Avoid Earning Nothing on Your Cash

1. Limit what you keep in current accounts

These accounts usually pay little to no interest. Keep just enough to cover your bills and day-to-day spending.

2. Shop around for the best rate

Don’t rely on your high-street bank. Use comparison sites or platforms to find competitive rates across fixed-term and notice accounts.

3. Make use of Cash ISAs (UK domiciled clients)

While the interest might be slightly lower, the tax advantages can make ISAs a better option — especially for higher-rate taxpayers or those with larger savings.

4. Look at gilts

Short-dated, low-coupon gilts have become more attractive. Since capital gains on gilts are tax-free, they can offer strong after-tax returns — but they’re best suited to those who understand the market.

5. Consider money market funds

These typically offer returns higher than standard savings accounts, while maintaining low risk. Many can also be held within an ISA for tax efficiency.

6. Think about investing

A general rule is to hold 3–6 months of expenses in cash, and invest the rest for the longer term. Barclays data shows a 91% chance that shares outperform cash over a 10-year period.

The Bottom Line

Leaving your money in a zero-interest account is effectively losing money over time. With a few simple steps, savers can unlock far better returns — and protect their wealth for the future.

Get in touch with one of our advisers today to explore the best options for you!

Will is an Independent Financial Adviser with over a decade of experience helping expats make the most of their international status.