Joel Davies
Posted By Joel Davies
03/02/2022

If you’re one of the UK's three million pensionable-age savers holding all your ISA savings in cash, it may be time to reconsider your options.

Data gathered by pensions consultancy LCP has found that more than three million pensioners have all their ISA savings in cash.  According to their research, the average amount of ISA savings of over-65s is £52,500 - with 3.4 million over-65s holding an average of £25,383 exclusively in Cash ISAs.

Inflation is like a tax on savers and high inflation rates are going to result in brutal cuts of more than £3bn in the total spending power of pensioners’ cash savings in the coming year.  This means that, based on current UK inflation figures, even a relatively generous 1% interest rate in a Cash ISA would see you lose 4.4% of your spending power over the course of a year.

This is an average loss of more than £1,100 in your spending power in the next year.

Of course, we appreciate that holding some cash in easy access accounts is convenient and indeed important in case of unforeseen emergencies, but these figures show that huge amounts of money are sitting in cash ISAs.  Many instant access Cash ISAs pay little or no interest and inflation will massively impact the value of these savings. 

So, with the real value of your state pension also being squeezed, if you're an older saver you should seriously consider whether keeping your money in these cash accounts is the best way to protect your hard-earned savings.   Cash ISAs can, if appropriate, be transferred into other types of ISAs to change their return characteristics, without losing their tax-efficient status.

This is not a personal recommendation to invest but if you’re keeping money in Cash ISAs and want to best protect your savings,  you should seek independent advice before making an investment decision.

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