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15 Nov 2019

Go Direct Personal Finance News  2009

Savers’ nightmare continues

Inflation figures released today show the Consumer Prices Index (CPI) remained at 4.50% during May.

To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 5.63% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 7.50%.

Basic rate taxpayers have just one account, a fixed rate ISA, which negates the effects of inflation. 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 inflation at 5.2%.

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 £9,441 today.

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

“Rising inflation means hundreds of thousands of savers need accounts paying a staggering 5.63% before they earn a real rate of return on their savings."

“This is going to be pretty difficult bearing in mind the average interest offered on an easy access savings account is 0.89%.
 
“As the Government’s 2% CPI target slips further beyond the Bank of England’s grasp, it is the nation’s savers who are left suffering the consequences of eroding spending power with little hope of rescue.

“Over the last six months the number of savings accounts that beat inflation for basic rate taxpayers has dropped successively from 22 at the start of this year, to just one today. This deal is a five year fixed rate ISA.

“Cash ISAs limit the amount of investment and therefore return, which is yet a further hindrance when trying to make ends met.”  

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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