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The savings underclass
Inflation figures released today show the Consumer Prices Index (CPI) fell during June, from 2.8% to 2.4%.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 3.00% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 4.00%.
Today there is a choice of 278 standard savings accounts that basic rate taxpayers can choose from to negate the impact of tax and inflation and 160 for a higher rate taxpayer.
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 £9,232
Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said:
“Today’s fall in CPI is welcome news, although it is not enough to relieve the general hardship and disappointment that continues to blight savers.
“Many people look to their savings to supplement their income when they retire. Monthly paying interest accounts usually offer a lower return than their annual interest equivalents, which puts those relying on these accounts at an immediate disadvantage and that is before you knock off inflation and the taxman’s cut.
“Those prudently saving for ‘a rainy day’ will find they are still taking one step forward and one step back as their good intentions are dwindled by inflation.
“Today’s news means that there are now only 278 (out of 1,122) standard savings accounts that negate the effects of tax and inflation. The silver lining is that last month there was a choice of only 210 accounts.“There are 156 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 122 non-ISA accounts that beat inflation and these now include for the first time this year, notice and no notice accounts.”
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.
Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.
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