You might have heard that the Bank of England held the base rate at 3.75% in February. On the face of it, this should be good news for savers. Unfortunately, banks are cutting savings rates across the board.

According to Moneyfacts, more than 70% of savings providers have already cut their rates since the start of 2026. The average easy-access account now pays just 2.42%, down from 2.92% a year ago. Cash ISAs have fared similarly, dropping from 3.06% to 2.60%. Both are at their lowest since mid-2023, in a move described by Moneyfacts as the “slaughter of savings rates”.

Inflation is the Hidden Enemy

Whilst cash is often described as “risk free” because the capital value should never fall, the real risk over the medium-to-long term is spending power, measured by inflation. With inflation currently running at 3.4%, the average savings account is losing about 1% over the year in spending power, and that’s before any taxation.

Let’s put a number on that. If you’re sitting on £100,000 in an average easy-access account, you’ll earn around £2,420 in interest over the year. But inflation at 3.4% means the real cost of the things you buy rises by £3,400 over the same period. If banks were required to show you the effect of inflation, they would be reporting a £980 loss over the year, which might cause savers to look twice when they receive an annual statement!

What Can You Do?

There’s no need to panic – rates don’t tend to change quickly, and inflation has been falling since the double-digit rates in 2022. However, it does make sense to review the situation. Here is a quick action plan if you are worried:

Check your rates today

Don’t assume your bank is still paying what it was six months ago. Log in, check the rate, and compare it against the best available deals (we use Money Saving Expert for this). At the time of writing, the top savings rate from a challenger bank was 4.5% – more than 2% higher than the average!

Think about whether you’re holding too much cash

There’s a meaningful difference between holding cash as a buffer and holding cash as a long-term store of wealth. If you’re planning for, or living through, retirement with a time horizon of five, ten, or twenty years, cash that isn’t needed in the short term or for “just in case” might be better redeployed in stock market-based investments.

Use the end of the tax year wisely

The tax year ends on April 5th, which means you still have time to use your 2025/26 ISA allowance of £20,000. Cash ISAs remain useful for shielding interest from tax, but with average rates under 3%, it’s worth asking whether a stocks and shares ISA might serve you better over the longer term.

Don’t forget the FSCS limit has changed

Since 1 December 2025, the Financial Services Compensation Scheme protects up to £120,000 per person, per authorised institution, up from the previous £85,000. That’s welcome news, but remember that some banking brands share a licence, so it’s worth checking that your deposits are genuinely spread across separate institutions, not just separate accounts within the same group.

Get in touch if you want a second opinion

Cash is an important part of a well-balanced financial plan. We all need a buffer for emergencies, for upcoming expenditure, and for peace of mind. But the current environment, with savings rates falling, inflation above target, and further base rate cuts expected later this year, makes a strong case for reviewing how much you really need in cash and whether the rest could be deployed more effectively.

If you are already a client, we will no doubt have already spoken about how much cash is sensible to hold over the longer-term. If you’re new to Optimum Path, get in touch and ask us for a second opinion on your cash balances.

Get in touch at hello@optimumpath.co.uk or call us on 01664 778899. You can also book a quick call directly through our website.

This article is for information only and does not constitute financial advice. If you’d like advice tailored to your circumstances, please contact us.