‘Lost decade’ since financial crisis for cash savers

Cash savers have suffered a “lost decade” as returns have been hammered in the tough economy.

Rachel Springall, a finance expert at Moneyfacts.co.uk, said those looking to make their money work harder may need to consider a challenger brand that they are less familiar with rather than sticking with a better-known name.

She said people who rely on their savings income will have seen the average return on an easy access account plunge from 3.77% a decade ago to 0.76% by September 2018.

She continued: “Throughout the decade it hasn’t just been the crash to influence the market.

“Government lending initiatives effectively pulled the floor out from under the savings market, as lenders could borrow cheaply through the new schemes and ultimately didn’t need savers’ deposits to fund their mortgage books.”

She continued: “Thankfully, there has been a shake-up with the number of new banks entering the market, and challenger banks are keen on attracting savers.

“Therefore, savers will need to consider more unfamiliar brands to discover the top deals going, especially if they are looking to fix over the shorter term.”

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said there has been a huge expansion in the amount of money held in accounts paying no interest, from £48 billion in September 2008 to £164 billion.

Highlighting the “lost decade for cash savers”, he said: “There is still little relief in sight, 10 years down the line, as rates are expected to rise very slowly, and only in the absence of any economic shocks.”

Savers do, at least, have the protection of the savings safety net if their bank or building society goes bust.

The Financial Services Compensation Scheme (FSCS) protects savers’ cash up to the current deposit compensation limit of £85,000.

In autumn 2008, five financial institutions collapsed affecting over four million retail bank accounts in the UK. The most prominent were Bradford & Bingley and Icesave.

Around £20.4 billion in compensation was paid by FSCS to customers of the five banks.

Mark Neale, FSCS chief executive, said: “Our role in protecting members of the public came to the fore over the autumn 10 years ago, as FSCS made payments totalling more than £20 billion to protect consumers.”

He continued: “Public trust in the banking system is essential for the economy to function.”