An estimated £858.5bn of cash held in adult savings accounts is now growing in real terms after the rate of inflation fell in June, according to research from Paragon Bank.

The bank’s analysis of the latest CACI data, which compiles savings data from 40 providers, revealed that the total, worth 75% of the total interest-bearing adult savings stock, is sitting in savings accounts earning 2.01% interest or higher.

Over half of that amount, £446.9bn, is held in accounts earning 4.01% or more, boosted over the last 18 months by the uptake of fixed-term savings.

Any savings account paying interest at or below the level of inflation means that the saver’s money is losing value in real terms because the price of goods and services is rising faster than the interest they earn on their account. Conversely, cash held in savings accounts paying rates higher than inflation increases the purchasing of those funds.

Despite consumer price index (CPI) inflation falling to 2.0% in May, £291.4bn of adult savers’ money held in adult savings accounts is still losing value in real terms as this amount sits in accounts earning 2.0% or below.

If the cash held in non-interest bearing current accounts is included, that figure rises to £609.7bn.

Managing director of savings at Paragon, Derek Sprawling, said: “Savers have had to wait for a long time for their money to grow in real terms, but it’s positive for them that through banks passing on increases in bank base rate, and the switch to fixed-term products, nearly three-quarters of cash held in adult savings accounts is now increasing their purchasing power.

“However, if you combine money held in current and savings accounts earning 2% or below, that is over £600bn losing money in real terms and seeing their purchasing power diminish. With so many savings accounts offering rates above 2%, savers should make sure their money is working hard for them.”

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