Savings in UK bank accounts during lockdown have grown at double the average monthly rate of the last decade, as individuals face restrictions on spending.

During lockdown, the amount saved in interest-earning bank accounts reached £828bn in July 2020, increasing an average of 1.3% per month. This is more than double the average monthly increase in savings of the last ten years of just 0.5%.

The amount saved in non-interest bank accounts, such as current accounts, also rose during lockdown to £205bn in July 2020. Savings in these accounts increased at an average monthly rate of 2.1%, compared to 0.9% over the last ten years.

For many people, rising savings during lockdown were driven by restrictions on typical outgoings such as shopping, holidays, entertainment and other leisure activities. 

ONS data shows that the average household spends £51.30 a week on eating out at restaurants and £41.30 on package holidays. This was restricted during lockdown, due to the closure of the hospitality sector and travel bans. 

Unfortunately, savers will find that bank accounts offer extremely low interest rates. The average interest rate on current accounts is just 0.07%. Quite often, savers will choose to deposit any additional cash in standard bank accounts due to the perception that other saving products such as ISAs do not offer the same level of flexibility. 

However, instant-access cash ISAs offer better rates while allowing withdrawals to be made at any time. Consumers can also withdraw their money from these accounts and then deposit the money again without reducing their £20,000 annual limit. 

The additional savings during lockdown presents individuals with a unique opportunity to generate higher returns over the long-term, by investing any spare cash. This is particularly important for those saving for retirement. 

Individuals with a long-term outlook and who are willing to take on more risk, may want to consider investing their spare cash in equities. Since 1925, UK equities have returned 12.4% a year, compared to global bonds at 6.6% and cash at 4.9% per annum.

Speak to us to find out more.