Low-interest cash ISA deposits languishing behind inflation and losing savers money ...Middle East

Inflation rose to 3 per cent in the year to January, according to figures released on Wednesday.

This is the third month in a row that average ISA deposits have been below inflation, meaning savers are seeing their cash chipped away in real terms.

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It comes as the Treasury considers the possibility of scrapping or limiting cash ISAs in a bid to encourage Britons to put more money into investments like the stock market.

And savers could get even better returns by investing in stocks and shares ISAs, though there is also a risk of losing money.

Holly Tomlinson, financial planner at Quilter, said: “Following a relatively rare period of cash ISAs delivering above inflation returns we are now back to people losing money in real terms by keeping their money in cash.

Currently it is possible to put £20,000 a year into an ISA with all subsequent interest free of tax.

The two main types are cash ISAs and stocks and shares ISAs, which must be put into the stock market or similar investment vehicles – making more profit over time but also coming with more volatility.

But the Government has repeatedly refused to rule out putting new curbs on the cash form of the ISA.

Best cash ISA rates

Easy-access – Trading 212 (5.03 per cent)

One-year fix – OakNorth Bank (4.46 per cent)

Two-year fix – Secure Trust Bank (4.41 per cent)

No decisions on possible policy changes have been made and nothing is expected to be announced before the next Budget in the autumn, with any changes likely to take effect from April 2026.

However, building societies and banks have spoken out against making changes to the cash ISA.

Chris Irwin, director of savings at Yorkshire Building Society, said removing cash ISAs as an option for savers would “have detrimental impacts on the financial well-being of many, along with increasing their tax liability”.

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