Analysis of Bank of England data by Coventry Building Society has found a £100bn fall in balances saved in easy access accounts over 2023.
This was the largest withdrawal recorded after the Global Financial Crisis.
Overall, household savings grew by just 2% year-on-year, an increase of £36bn and the lowest level of annual growth seen in 15 years.
However, money held in both fixed accounts and ISAs increased last year as people locked in their money at higher rates and tax efficient savings, by £71bn (36%) and £47bn (16%) respectively.
On average, £258bn earned no interest throughout 2023, meaning that households missed out on £457 each by not checking the rate on their savings and switching to better paying accounts.
Jeremy Cox, head of strategy at Coventry Building Society, said: “The UK lost its savings habit in 2023 after building up a substantial safety net during the pandemic.
“Money in easy access accounts took a drastic downturn as households drew on their day-to-day funds to support spending and higher price rises.
“With over a quarter of a trillion of pounds still languishing in accounts earning 0% interest, households not only felt the savings squeeze, but also lost out on hundreds of pounds worth of interest by not moving the savings they had into better paying accounts.
“And that’s on top of the impact high inflation had on the amount people can buy with their savings throughout 2023.
“Some savvy savers did benefit by locking in their savings for longer in restricted access, notice accounts and bonds.
“Generally, the rates on these products will always outperform easy access accounts over time.
“Tax efficient ISAs were also popular as more people sheltered their savings from tax.
“There’s still a huge opportunity for people to look at their finances and give themselves a pay rise in 2024 – with rates of around 5% readily available on flexible accounts, moving £10,000 could earn £500 a year in interest with access to take money out when needed.
“The good news is that current savings rates are now higher than inflation too.
“As the end of tax year approaches, those with larger savings pots need to be mindful of income tax and decide whether moving some of their savings into an ISA is the right move for them, providing a tax efficient way of saving £20,000 a year.
“The Chancellor’s Budget on 6 March may also include measures for savers – so another good reason for people to review their savings plans in the next couple of months.”
