Desperate times for savers
Inflation figures released today show the Consumer Prices Index (CPI) decreased during March from 4.4% to 4.00%.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 5.00% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 6.67%.
Basic rate taxpayers can choose from 25 accounts that negate the effects of tax and inflation, all but one of which are fixed-rate ISAs. There are no inflation-beating accounts available to higher rate taxpayers and, worrying for everyone, there are no accounts available for any taxpayer that beat RPI at 5.3%.
The effect of inflation on savings means that £10,000 invested five years ago allowing for average interest, inflation and tax at 20% would have the spending power of just £9,587 today.
Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said:
“Whilst a fall in inflation is welcome, it won’t change the fortunes of the nation’s savers who are still battling against shrinking spending power and a lack of inflation-beating savings accounts.
“CPI is still double the Government’s 2% target, which spells desperate times for savers who have almost nowhere to place their money to beat inflation.
“Pensioners trying to supplement their income with interest will feel the ensuing pain the most.
“Over the last six months the number of savings accounts that beat inflation for basic rate taxpayers has dropped from 118 to 25 today, 24 of which are fixed rate ISAs.“Cash ISAs limit the amount of investment and therefore return, which is yet a further hindrance when trying to make ends met.”
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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