Millions of people who save money in cash ISAs are losing out on hundreds of pounds

There are billions of pounds sitting in cash ISAs that yield interest rates of 05 percent or less

Millions of savers lose out on hundreds of pounds annually because the interest rates on their cash ISA savings are so low.

Yorkshire Building Society has released new data showing that over 46 billion are in approximately 6.9 million cash ISAs that pay interest rates of 1.5 percent or less.

Just over 6,700 is the average balance in these cash ISAs. Even though cash ISA rates are competitive, the amount in these low-paying accounts has increased by £3 billion over the past 12 months.

With an interest rate of 5.56 percent, the highest-paying cash ISA currently available on the market could result in significant losses for savers who aren't monitoring the best interest rates.

MoneyfactsCompare states that a saver who invested 6,700 in a cash ISA that paid interest at a rate of 1.5 percent for a full year could end up with 6,800.50, earning 100.50.

The same deposit would earn 372.52 in interest by the end of the year, for a total of 7,072.52 in the best-performing cash ISA (currently 5.56 percent). This implies that by selecting a market-leading account, they can receive 272.02 more.

In actuality, savers whose funds are invested in these low-yield cash ISAs are losing money.

The reason behind this is that since April 2021, inflation has not been at 1 percent or less. Inflation in the UK has been high lately, reaching a peak of 11.1 percent in October 2022. Prices increased by 2.8 percent in the year ending February 2025.

As a result, the ISA holders' holdings are losing purchasing power because the interest they receive is insufficient to keep up with inflation.

Yorkshire Building Society's senior savings manager, Harry Walker, stated: "After two years of sharp increases in savings interest, it's surprising to see so much money still sitting in low-paying ISA accounts.

Savers should "take action and think about how they can make their hard-earned cash go as far as possible," he said, adding that the new fiscal year offers a "perfect opportunity" to review ISA holdings.

A spokesperson for Moneyfactscompare . co . uk, Caitlyn Eastell, echoed this sentiment: "Savers who do not actively seek out more alluring deals may lose money in real terms as sticky inflation eats away at their pots.

How do I move my ISA cash?

It's a good idea to make sure you have chosen the best cash ISA for your money because cash ISA holders are losing out on hundreds of pounds in returns by keeping their funds in low-paying accounts.

The process of transferring your ISA is rather simple, usually takes no more than 15 working days, and has no bearing on your annual allowance.

But before you choose to move your ISA to a better provider, it's crucial to understand the nuances of the procedure. The most frequently asked questions concerning the process are addressed in the comprehensive guide provided by the BFIA on how to transfer an ISA.