He has explained how to deal with it

This is what all savers need to do to avoid the “silent tax” of inflation, according to an expert. Many savers believe they are doing the right thing by keeping large amounts of money safely tucked away in cash savings accounts.

But, according to a wealth management expert, inflation could be quietly eroding the real value of those savings year after year. While interest rates on savings accounts have improved compared to recent years, an expert warned that many people still underestimated the long-term damage inflation could cause to purchasing power if their money was not working hard enough.

Paul Denley, CEO at London-based Oakham Wealth Management, said inflation acted like a hidden tax on savers because rising prices steadily reduced what money can actually buy over time.

He added: “Inflation is the silent tax many people underestimate. A headline gain means little if purchasing power is falling faster underneath it.”

Although cash savings remain important, particularly for emergencies and short-term spending needs, Mr Denley warned that relying too heavily on cash for long-term wealth preservation can become costly over time.

He said: “Cash absolutely has a role for emergency reserves and short-term spending needs. But long-term wealth preservation requires people to think in real terms, in other words, after inflation.”

One of the biggest mistakes savers make, according to Mr Denley, is leaving money sitting in low-paying accounts out of convenience or inertia. While some banks have increased savings rates significantly, others continue offering very poor returns on default accounts, particularly for existing customers who rarely switch providers.

Mr Denley added: “The good news is that savings rates have improved. But complacency remains expensive. Savers should actively compare providers and avoid leaving large balances languishing on poor rates simply because it feels easier to leave things where they are.”

He also encouraged people to make greater use of tax-efficient ISAs wherever possible.

He continued: “Using ISA allowances effectively can make a significant difference over time because returns grow free from tax.”

For savers with longer investment horizons, Mr Denley said many people should think more broadly than cash alone when trying to protect themselves from inflation. Historically, diversified investments such as equities have generally provided stronger long-term protection against rising prices than cash savings, although they come with greater short-term volatility.

He said: “For longer-term capital, particularly over periods of five years or more, diversified equities have historically offered a stronger defence against inflation than simply holding cash.”

However, Mr Denley stressed that investment decisions should always reflect somebody’s personal circumstances, financial goals and tolerance for risk.

He said: “The trade-off is volatility, which is why time horizon and risk tolerance matter enormously.”

He added that many people instinctively fear stock market fluctuations while underestimating the slower, but potentially more damaging impact of inflation itself.

Mr Denley said: “Market volatility is very visible and understandably makes people nervous. But over the long term, the slower and less obvious erosion of purchasing power can actually prove far more damaging to wealth.”