Some UK households have accumulated large cash balances in recent years. Following the COVID19 pandemic, excess savings were estimated at between £143 billion and £338 billion, as spending opportunities were limited and uncertainty encouraged precautionary saving.1
Unlike in some countries — particularly the United States — British households have been slower to spend or invest this money, instead leaving much of it in bank accounts.1
One of the reasons for this may have been due to high interest rates, following the pandemic. The Bank of England base rate which directly influences interest rate for funds on deposit, peaked at 5.25% in August 2023. This marked a significant increase from the previous rate of 0.1% in March 2020.
It was reported in 2024 that over £366 billion was still sitting in UK current accounts earning less than 1% interest, with almost a fifth (17%) of UK adults admitting to never checking the rate of interest they are earning.2
So why do individuals hold money in cash ?
● Risk aversion: many people view investing as too risky or complex
● Lack of knowledge: a large proportion of savers say they don’t know how to invest
● Cultural habits: cash is seen as safe, accessible, and familiar
The Government sees this as an issue as not only does this mean lower returns for investors but also it does not provide capital for businesses.
With a view to change this culture the Government has announced in the Autumn Budget 2025 that it will reduce cash ISAs from £20,000 to £12,000 for those under 65 years old and introduce ‘Savvy the Squirrel’, which is the mascot of a nationwide campaign called, “Invest for the future” which was launched in 2026.
If you hold access funds on deposit and would either like to research whether you can enjoy a higher interest rate or other alternative solutions, why not pick up the phone today and request a free without obligation consultation?
*1ONS, 22nd July 2024
*2Yorkshire Building Society, 10th June 2024
The content included on this page is based on our understanding of the UK tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances.