Cash ISA savers missing out on billions with low-interest accounts
According to Paragon Bank research, millions of savers keep money in Cash ISA accounts paying two per cent or less.
Figures from Paragon reveal that £54bn is held in such low-interest Cash ISAs.
Cash ISAs remain hugely popular with savers as a low-risk option for their money, with any interest earned free of tax.
Around 40 per cent of the total amount of money held in ISAs is in cash accounts, as opposed to other options such as Stocks and Shares ISAs*.
But with CPI inflation running at three per cent, earning interest of two per cent or less means savers’ cash is losing value in real terms.
Paragon found that the average amount held in sub-two per cent cash ISAs is £7,252.
However, some savers have considerable amounts of cash in these lower-interest deals.
Around 1.6m such ISAs have more than £10,000 deposited, while 18,305 have between £85,000 and £100,000.
Paragon managing director of savings Derek Sprawling said: “On the plus side, it’s positive that savers are protecting their money from tax by keeping it within an ISA wrapper.
“But on the downside, there’s billions of pounds that could be working harder by being moved to higher paying accounts.”
Paragon said that £52.4bn earning two per cent or below was held in easy-access Cash ISA accounts, while £1.7bn was held in fixed rate ISA accounts earning two per cent or less.
Easy-access cash ISAs have variable savings rates, which have dropped to their lowest level since August 2023, according to financial experts Moneyfacts.
Moneyfacts found that the average variable-rate cash ISA now pays 3.02 per cent, down from 3.32 per cent in March 2024.
By comparison, the typical fixed-rate ISA currently has an interest rate of 4.07 per cent, compared to 4.49 per cent 12 months ago.
The average notice ISA paid 3.79 per cent in March 2025, a reduction from 4.12 per cent in March 2024.