IIf there’s one asset that we all definitely have, it’s cash. So it is strange that there is no long-term cash index available – which we can use to compare other investments.
Academics estimate returns on cash by resorting to Treasury bill or money market rates. But what would a savvy British investor have gained by investing his money in the bank?
Monevator is dedicated to DIY investing after all, and so the Daily Cash Savings Index will better reflect the experience of individual investors. It will also serve as a useful reference point for future expectations.
And so without further ado (I’ve always wanted to say this!) I present this Monevator Cash Total Return Index.
UK cash savings index
Our new cash index tracks the total returns of UK savings accounts based on monthly interest rate data dating back to 1900.
I have relied on three sources:
My heartfelt thanks and additional suggestions Monevator readers alan stockeR, who suggested using BSA and MSE source, and SnowmanWhose ongoing observations provided stimulating juice for sorting through piles of dusty old interest rate records.
I will explain the decisions I made in creating the index at the end of the article. But first it’s time for me to present the facts on cash savings in the UK.
Spoiler: They’re not pretty.
illusion of wealth
The green cash overhead areas shown in the graph below represent the comfortable view. interest is increasing on interest. But the wavy red line that goes more or less nowhere return on cash after inflation: :
data from Millennium of macroeconomic data for the UK, Building Societies’ Association (BSA) Yearbook, money saving expertAnd ons. April 2026.
The annual real return on UK cash savings is 0.1% For the period 1900-2025. Sad
This is a performance that is poor compared to other mainstream asset classes:
- Money market annual return is 0.4% (0.3% after fees)
- All Stock Gilts are 0.8% (0.7% after fees)
- World equity is 5.6% (5.5% after fees)
In short, those returns and the chart above explain why we urge readers not to put everything in cash. Green things can barely keep up with inflation over time.
Of course, cash is not the worst place to be in the short term, as we saw in 2022. And there are good reasons to always keep some ready in reserve.
However, as the years turn into decades, catching a big nail could cost you dearly.
The silent whisper of the slow punter, or the quiet seething of that ill-fated frog come to mind.
hard times
The next chart highlights cash’s longest decline in real terms – including a 72-year recession:
We’ve shared some horrific charts over the years Monevator. But it’s right there.
The red areas show you the length and depth of the cash withdrawal, as seen via inflation-adjusted Google. They demonstrate that if you rely too heavily on cash it can be a dangerous place to store your money.
Suppose the same applies to all asset classes. But cash is misleading because it looks very stable in nominal terms.
However, as the chart shows, cash can cause huge losses from time to time – and the culprit is not hard to find:
As we have all experienced recently, the monster of cash-swallowing inflation is not a curse that has faded into history like smallpox, or the dirt in your codpiece.
Take a look at the cyan growth line in our chart above. Cash has performed really well only in a few short periods: namely 1921 to 1933 and 1982 to 2008.
On both occasions you could have done better in bonds.
Not-So-Flash Crash
Here’s the full drawdown chart of cash’s worst bear market ever.
The record shows:
- Cash expenditure remained in negative territory for more than 72 years
- It took 48 years to sink to the bottom
- The deficit reached -58% in April 1981
- Recovery took 24 years as of December 2005
Currency markets also suffered similarly severe losses. UK government bonds suffered an even deeper, if smaller, decline. (See our previous retelling of the story of the UK’s worst-ever bond market collapse. Prepare a stiff drink.)
Essentially, UK governments failed to control inflation, which ruined the real returns of fixed income assets.
The red bar above partly explains why my grandparents – born around 1910 – were so strict. He had only post office savings. But whatever he kept was destroyed by inflation. Particularly in the early 1940s, early 1950s and, most brutally, in the 1970s.
Yet go back to the first chart in this article and the nominal return curve of cash gives no indication of these life-long losses.
cash after the global financial crisis
Let’s move forward quickly.
The competitive savings market we enjoy today was unknown to previous generations.
British savers had little choice until the cozy arrangement of our banks and building societies collapsed due to deregulation after 1987.
Two decades later, the retail savings market was thriving on the eve of the credit crunch, as documented money saving expert Empowering weekly emails.
Access rates topped 6% as the first rumblings of the storm hit the consumer landscape in 2007.
But within a few months, Britain experienced its first retail bank run in 140 years. Key institutions faltered and the economy shut down.
The Bank of England cut rates to historic lows, and real cash returns fell into the red:
Since January 2009, it has been in a cash crunch in all but one month at the time of writing. It’s 17 years of decline and counting.
The chart shows that cash was not a means of saving when interest rates dropped to almost zero, nor when they bounced back post-Covid.
Indeed, the sharp decline to the latest cash trough (-15% in May 2023) was a direct consequence of the 2021-23 inflation increase. The only good thing about cash during the recent affordability crisis was that its decline was not as bad as bonds.
Frankly, when inflation breaks out neither cash nor bonds are the place to be.
Please read our previous search for the best inflation hedges for more details.
conflict of interest
Before starting this project, I thought an instant saver would beat money market rates. But the figures say something else.
The next chart shows how British savers have beaten the Bank of England’s official rate since 1900. (Money market returns usually track the central bank rate like a cute teenager):
There’s a lot of economic history packed into this chart, but the conclusion is that savers have outperformed the going rate during only two eras.
By the time Churchill was re-elected as Prime Minister in October 1951, the outbreak of World War II had begun.
The second one appears in MSE The era of consumer choice since 2004. Until the global financial crisis, the green cash rate was ahead of the red bank rate because savers were offered very generous terms – the likes of which have not been seen since.
As the scale of the crisis became clear, the Bank Rate was reduced from 5% in September 2008 to just half a percent by March 2009.
Still, if you kept your job, A hefty rate tart’s premium emerged Because various banks and building societies need to withdraw cash from time to time to balance their books.
Switching to whichever institution was in the most trouble at the time probably wasn’t the best financial move I ever made (reader, I was a rate tart) but hey, the British government was playing the backstop so it seemed OK.
However, in my view, the savvy saver’s edge is hardly worth the effort from 2022 onwards, although the premium does increase slightly in 2025 – as you can see at the end of the chart.
Inside Cash Total Return Index
Assembling the index required a surprising number of decisions – particularly MSE-driven ‘Best Buy’ era.
The most important thing to say is that the index is made up of compounded interest rates for short-term savings deposit accounts.
By October 1939 – We use ‘Interest Rate on Sight Deposit Accounts’. Bank of England defines A visual deposit account is as follows:
…where the depositor has access to the entire balance of the deposit, without any penalty, either on demand or at the close of business on the next day after the deposit is made.
November 1939 to March 2004 – Interest figures come from rates on ordinary share accounts provided by the Building Societies Association. An ordinary share account was just a standard savings account that could be accessed using sacrum. (Ask your grandparents. Or me! I had a Post Office Passbook account from my childhood, until I plundered it as a desperate 21-year-old trying to make rent.)
April 2004 to date – Best interest rate collected by money saving expert At the end of each month, provided the account meets the following criteria:
FSCS protected (or European equivalent schemes before Brexit).
95 days or less notice is required. This provision is compared to historical treasury bill rates which are generally for 3 month bills.
Introductory rates are included as long as they last for at least six months.
Exclusions:
Cash ISA accounts have historically had severe limits on balances.
Fixed Term Rates – These accounts are subject to interest rate risk.
Accounts that limit withdrawals to fewer than 12 per year or charge interest rate penalties for withdrawals.
Minimum deposit requirements no more than £1,000 or maximum balance less than £85,000.
Current accounts, as they are generally subject to restrictive terms and conditions, including strict limits on bonus interest rates.
Especially postal or branch accounts.
Cashback Bonus.
Tax rates and fees as per standard practice for indices.
imaginary saver
Indices, by definition, are based on a set of guidelines that simplify the real world to produce a snapshot of the market.
Monevator The Cash Total Return Index is based on how much a switched-on UK retail saver could have earned on liquid cash savings from 1900 to today.
My supposed saver took note of the rates and moved his money to the best product available. But they did not use exotic or overly restrictive products.
They are not average savers, but neither do they have unlimited time nor the motivation to pursue every avenue of savings.
Importantly, the index should be comparable with retail investment opportunities where an investor can invest more or less for any asset class.
For this reason, I only accept accounts that allow low minimum balances and high maximum balances.
I’ve also rejected fixed-term savings because they have inherent interest rate risk.
In the modern era, financial institutions are making every effort to achieve their goals to stay on top of the best-buy table for a long time, while avoiding attracting so much cash that it reduces their bottom line.
So I have to filter out that fiendishness to balance the features of a truly desirable cash product: liquidity, access and competitive interest rates.
Ultimately, I’m not making any claims about what a person might have earned. If, for example, you took term risk at the right time, or used interest-boosting techniques like current account stacking, the index could be beaten.
(Current account stacking enables a saver to boost their returns – and partially bypass balance caps – by opening multiple accounts that pay sweet rates of interest on limited amounts of cash. Maybe you opened ten accounts, maybe you opened 20. It was a viable strategy for adding up to your cash returns in the ZIRP era. However, when I ran the numbers I expected it wouldn’t move the needle as much. But this one And there’s the story.)
Okay, that’s all for now. I am very eagerly awaiting the views, reactions and criticisms of Monevator Massive. And I reserve the right to adjust the index in light of any bright ideas you have!
keep it steady,
accumulator
