Cash is often the first line of defence during market turbulence and the first asset you turn to in times of financial need, so one of the most important components of your portfolio. Advisers suggest holding six months worth of your expenditure in easy-access cash accounts for emergencies, for example, being made redundant. However, when interest rates are low cash rates can be poor and subject to inflation erosion, something that has been a particular problem over the past decade.
However, the financial services regulator, the Financial Conduct Authority (FCA), wants to improve the situation for long-term holders of easy-access savings accounts and easy-access cash individual savings accounts (Isas).
These products allow instant access to cash without a penalty, but tend to pay a lower interest rate than fixed-rate term savings accounts and Isas. And providers of easy-access accounts tend to pay lower rates to customers who have had accounts open longer. In 2015 the FCA found that a third of easy-access cash savings accounts and one-fifth of easy-access cash Isas had been open for over five years. And these accounts, on average, offered rates almost 1 per cent lower than accounts less than two years' old.