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Inflation rises to 2.7%

Inflation rises to 2.7%

Category: Savings

Updated: 18/06/2013
First Published: 18/06/2013

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Figures released by the Office for National Statistics (ONS) have revealed the Consumer Prices Index (CPI) rose during May to 2.7%.

News of the increase in CPI, from 2.4% in April, will be further bad news to savers who have endured poor returns on their investments.

Research by Moneyfacts.co.uk found a basic rate taxpayer would need to find a savings account paying at least 3.38% to beat inflation, whilst a higher rate taxpayer at 40% needs to achieve a rate of 4.50%.

This time last month six inflation-beating savings accounts were available in the market; however, as of today that number has fallen to zero.

Despite there being a total of 820 savings accounts in the current market, the latest increase in CPI has left savers exposed and with nowhere to protect their money from the effects of tax and inflation.

A £10,000 investment made five years' ago, allowing for average interest and tax at 20%, would now have the spending power of just £8,852.

Sylvia Waycot, Editor at Moneyfacts.co.uk, said: "It's bad enough that today's rise in inflation will reduce the spending power of the pound in our pockets, but the miserable returns on savings accounts mean there are few pounds in our pockets to start off with.

"Savers will be horrified to know that there are no standard savings accounts that beat or match the rate of inflation.

"Taking into account the taxman's share and the cost of living, savers need an account paying a hefty 3.38% before they earn a real rate of return and yet the average no-notice savings account only pays a miserable 0.70%.

"In contrast, a year ago, there were 123 ISAs and 87 non-ISA accounts that beat tax and inflation despite BoE base rate being static at 0.5% and CPI standing at 2.8%.

"Tax and inflation leave slim pickings for savers and being proactive about getting the best deal has never been more relevant. Check each anniversary that you are still in the best account and vote by moving your cash if you aren't," she added.


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