Using RIPA 2000 they can still put you in prison for up to 2 years for refusing to give up your encryption key.
You make an interesting point though. If the terrorists know it is dangerous for them to use the internet using accounts linked to them, then they will just find a way around it. Hack the neighbours WiFi, use public WiFi in Starbucks, go into the public library etc. Good forbid that might just talk face to face or use burner phones (which they are).
The desire for a complete surveillance society is based on a ridiculous political supposition that Big Brother makes our world safer. No more terrorists and paedophiles. It is easier than trying to make the big changes necessary in order to really tackle these problems.
I have no idea how we tackle paedophiles, but with Islamic fundamental terrorism, it would be a monometallic step if we, in the West, could do our meddling and remove or troops from "their lands", which has been a bone of contention since Bin Laden's first attempt on New York.
We aren't the world police force and we also need to stop dealing with countries like Saudi Arabia who prop up our defence industries and military industrial complex.