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No jumps of joy for savers
Inflation figures released today show the Consumer Prices Index (CPI) fell during February, from 3.6% to 3.4%.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 4.25% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 5.66%.
Today there is a choice of seventy-nine standard savings accounts that taxpayers can choose from to negate the effects of tax and inflation.
The effect 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 £9,198
Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said:
“This is the fifth month in a row that CPI has fallen and logic says that it must be easing some of the misery savers have suffered due to a combination of high inflation and the low savings interest rates over the past three years.
“However, it’s just a bit too early for everyone to burst into a chorus of ‘don’t worry, be happy’ as today’s figures still mean that there are only 79 accounts out of 1,126 that negate both inflation and the taxman’s cut.
“Today's accounts favour short-term bonuses which mask the lower rate that is applied on first anniversaries. Savers need to keep on top of their savings by reviewing the market annually.
“Today’s rate of inflation means hundreds of thousands of savers need an account paying a hefty 4.25% before they earn a real rate of return on their savings and yet the average no notice savings account only pays a paltry 0.98% which shows the size of the problem.“The number of savings accounts that beat inflation has risen over the past five months from none to a much more respectable 79 today, of which seventy are fixed rate ISAs.”
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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