With inflation rising more than expected at the end of last year and remaining above the Bank of England’s 2% target, new analysis from Fidelity International (‘Fidelity’) shows that savers lost almost £7 billion in real terms to inflation while they slept in 2025.
UK inflation rose to 3.4% in December, up from 3.2% previously, reinforcing concerns that inflation remains sticky and continues to quietly erode the value of household cash savings¹. With UK households holding around £1.88 trillion in cash deposits, Fidelity’s analysis shows that most savers still failed to earn returns that kept pace with inflation over the year².
Inflation ended the year at 3.4%, according to the Office for National Statistics3, while the average interest rate on existing easy-access savings accounts was just 1.94%, based on Bank of England data4. Fixed-rate savings performed better, with an average rate of 3.56%, but easy-access accounts remain the most popular among UK savers5.
Inflation wiped almost £18bn from the real value of cash savings in 2025
Fidelity’s analysis estimates that, assuming 70% of household savings are held in easy-access accounts and 30% in fixed-rate products, savers earned around £45.6bn in interest in 2025, equivalent to an average return of 2.43%.
However, once inflation at 3.4% is factored in, the real value of their savings fell by around £17.6bn over 2025.
Because UK adults spend roughly 38% of their time asleep, this implies that almost £7bn of purchasing power was lost while people slept, equivalent to around £122 per adult over the year6.
Marianna Hunt, Personal Finance Specialist at Fidelity International, comments: “Inflation is a silent threat to savers with many people seeing the real value of their cash go backwards. With inflation rising again at the end of the year and remaining above target, our analysis underlines how even relatively modest inflation can continue to erode savings when returns on cash fail to keep pace.”
The risk of holding too much cash
Research has regularly demonstrated that, over long periods, investments are much more likely to beat inflation than cash.
Looking at every rolling 10-year period between 1988 and 2025, Fidelity research shows that someone investing in UK stocks would have beaten inflation 95% of the time, compared with just 58% of times for someone saving in cash7.
Marianna Hunt continues: “Holding some cash is essential. For most people, having three to six months’ worth of essential spending in cash provides an important safety net, and many retirees sensibly hold larger cash buffers to manage short-term needs and market volatility.
“The risk comes from holding too much cash for too long. As our analysis shows, when savings rates fail to keep pace with inflation, large cash balances can quietly lose value over time – potentially undermining long-term financial security.”
What savers could have earned instead
Global equity markets performed well in 2025, with the MSCI World Index delivering a total return of around 13% over the year in GBP. If just a quarter of UK household cash savings (£470bn) had been invested, Fidelity estimates that the real value of savers’ money could have grown by approximately £44bn even after accounting for inflation8.
Their money would have grown by almost £17bn even as they slept.
Marianna Hunt concludes: “When money is invested, it has the potential to keep growing even while you sleep – working in the background while you rest, rather than quietly losing value to inflation.”
1Source: Fidelity analysed UK household cash savings using Bank of England savings rate data and Office for National Statistics (ONS) inflation, deposits and time-use data. Assuming £1.88 trillion in household cash savings, average returns of 2.43% in 2025 and inflation of 3.4%, Fidelity estimates the real value of savings fell by around £17.6bn over the year. ONS data shows UK adults spend around 38% of their time asleep; applying this proportion implies a real-terms loss of approximately £6.7bn while people slept, or around £122 per adult.
The analysis uses total household deposits as a proxy for cash savings. These deposits include current accounts as well as savings accounts. Interest rates vary widely between savers depending on product choice, provider and timing. The analysis assumes that interest and inflation accrue evenly through the year. This is a simplifying assumption used for illustrative purposes and does not capture month-to-month variation or compounding effects.
The analysis is based on population averages. Median cash savings are significantly lower than the mean, and many adults hold little or no cash savings. Individual experiences will therefore vary considerably.
3Source: Consumer price inflation, UK – Office for National Statistics
4Source: Effective interest rates – October 2025 | Bank of England
5Source: Financial Lives 2024 survey – Cash savings – Selected findings p.32
6Source: Time use in the UK – Office for National Statistics
7Source:Returns of cash savings modelling using a combination of Libor and Sonia. Inflation modelled using the Consumer Price Index (CPI). (LSEG Workspace)
8Source: MSCI World Index
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