Inflation figures released today show the Consumer Prices Index (CPI) dropped during June from 4.5% to 4.2%.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 5.25% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 7.00%.
Basic rate taxpayers can choose from 12 accounts that negate the effects of tax and inflation, all but two of which are fixed-rate ISAs.
Disappointingly, there are only two accounts available that beat Retail Prices Inflation at 5.00%.
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 £9,402 today.
Action group Save Our Savers wrote to the Bank of England last week to urge them to increase interest rates to help combat high inflation.
The group said that some £50 billion has been wiped from savers' funds in the last year alone.
And the Building Societies Association (BSA) recently blamed the high rate of inflation for a net fall in savings.
The BSA said that savers had pulled out their money from its members, choosing instead to invest in National Savings & Investment certificates which guarantee to pay above the rate of inflation.
The Post Office has also recently launched an account that pays above inflation.
"The cost of living may have fallen but the misery for anyone trying to get by on their savings continues unabated," said Sylvia Waycot, spokesperson for Moneyfacts.co.uk.
"Anything less means they will fall into 'the eroding spending power trap' which has already wiped almost £600 off the spending power of £10,000 in just five years.
"The plight of the pensioners naturally springs to mind, but this news will also be a blow to young people trying to save a deposit for a first home bearing in mind the average deposit account is only paying 1.32%.
"Over the last 12 months the number of savings accounts that beat inflation for basic rate taxpayers has dropped dramatically from 96 to a measly 12 today, 10 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 meet."
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