19 Apr 2024

Savers count inflation cost

Inflation figures released today show the Consumer Prices Index (CPI) fell during April, from 3.5% to 3.00%.

To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 3.75% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 4.99%.

Today there is a choice of 159 standard savings accounts that taxpayers can choose from to negate the impact of tax and inflation.

The impact of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20%, would have the spending power of just £9,208
today.

Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said:

“CPI may have fallen today but it hasn’t stopped the misery affecting the thousands of people with a standard variable rate mortgage who have seen the monthly cost of their mortgage rise even though Bank of England base rate remains the same.

“And it has done nothing to ease the plight of savers who continue to struggle to find a home for their money that is going to do it justice rather than just keep it safe.

“Today’s news means that there are now only 159 standard savings accounts that negate the effects of inflation and the taxman’s cut. The silver lining is that last month there was a choice of only 50 accounts.

“There are 127 ISAs that beat inflation, obviously helped by their tax advantage, though they are limited by the amount that can be invested (£5,640 per annum). By comparison, there are then 32 non-ISA accounts that beat inflation, all of which are fixed rate bonds.

“Today’s rate of inflation means hundreds of thousands of savers need an account paying a hefty 3.75% before they earn a real rate of return on their savings. Yet, the average no notice savings account only pays a disappointing 1.15% showing the size of the problem many still face.”

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

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