Above target inflation deals double blow to loyal savers as ‘loyalty penalty’ costs nearly £2,300

17 June 2026

• Inflation has remained above target at 2.8%.[1]
• A typical £20,000 pot earning 2.12%[2] grows to just £22,212 over five years; at 4.15%[3] it would reach £24,509.
• Inaction could cost savers £2,297 in lost interest – around £38 a month over 5 years.
• With inflation factored in, money in low paying accounts is losing value in real terms.

With inflation remaining stubbornly above the 2% target, at 2.8%, millions of savers with money in low paying accounts still face a double blow: weak interest rates and lacklustre spending power. New analysis from LHV Bank shows how the cost of staying put – the so called "loyalty penalty" – adds up, and urges savers to take action now.

The cost of standing still

LHV Bank looked at what typical savers earn on an average easy access account compared with a more competitive one. A saver with £20,000 in an account paying 2.12% AER – the current average for easy access accounts, according to Finder – would see their balance grow to £22,212 after five years. Moving that same balance to an account paying 4.15% would take it to £24,509: an extra £2,297.

The same applies to smaller balances. A £10,000 pot grows to £11,106 at the average rate of 2.12%, but £12,255 at 4.15%: a difference of £1,149.

Why inflation makes it worse

Interest is only half the story. When prices are rising at 2.8%, an account paying 2.12% delivers a negative return of roughly -0.66%.[4] In real terms:

• £20,000 at 2.12% loses about £132 in spending power over a year.
• £10,000 at 2.12% loses about £66.

By contrast, an account paying 4.15% beats inflation at 2.8%, delivering a real return of around +1.31%:

• £20,000 grows by roughly £263 in real terms.
• £10,000 grows by roughly £131.

Savers in low paying accounts are earning less and getting poorer in real terms, while those in competitive accounts are still building wealth.

Loyalty isn't being rewarded

Despite this, millions remain in accounts paying next to nothing:

• 8 million UK savers hold accounts paying 1% interest or less.[5]
• Yet trust stays high with 57% of lower earners and 60% of higher earners saying they trust their bank or building society.[6]
• 70% of adults believe all banks are basically the same.[7]

Be an active saver

The single biggest thing savers can do is stop being passive. Building wealth, and beating both the loyalty penalty and inflation, comes down to a few simple habits:

1. Check your rate. Find out what your savings are actually earning today. Many people are shocked to discover it's 1% or less.
2. Move your money. If your rate doesn't beat inflation, switch to one that does. It typically takes minutes online.
3. Make it a habit. Set a reminder to review your rate every few months, and watch out for short-term bonus rates that quietly fall away.

Alex Beavis, Interim Director of Banking at LHV Bank, said:

"With today's inflation figures remaining above the 2% target, consumers continue to lose out to the loyalty penalty. Loyalty counts for little in savings. Banks profit from inaction, and savers who leave money in mediocre accounts get substandard returns, made worse by inflation eroding what they have.

"Being an active saver is the answer. Active savers don’t lock their money away for a ‘rainy day’. They check, they switch, and they keep doing it which turns savings into real growth. Savers should also be able to trust their banks to offer simple, clear accounts that pay strong rates for the long term, not headline rates that fade to nothing within months."

For more information, visit www.lhv.co.uk