Inflation rises to 3.2% - Savings - News - Moneyfacts


Inflation rises to 3.2%

Inflation rises to 3.2%

Category: Savings

Updated: 17/11/2010
First Published: 16/11/2010

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 It is now over 6 months old so the content may be out of date.

Savers looking for some momentary respite from the effects of low rates and high inflation have been dealt a further blow today

Figures from the Office for National Statistics show that the Consumer Price Index (CPI) in October increased slightly to 3.2%, from 3.1% in September.

Rises in prices for petrol and diesel, financial services, hobbies, games and toys meant the measure moved further away from the Government's 2% target.

Last week, the Bank of England admitted that inflation was unlikely to fall significantly in the short term and would remain above the 2% figure in 2011.

The major downward pressure on inflation between September and October came from food.

According to data, in order to maintain the purchasing power of their savings a basic rate taxpayer will now have to find a savings account paying an annual interest rate of 4.00 %.

A higher rate tax payer at 40% has the almost impossible task of having to find an account that pays 5.33%.

For a basic rate taxpayer, there are 31 savings accounts that negate the impact of inflation – a huge drop from September's 91 accounts.

Savers must lock in for a concerted period to gain these rates, or be prepared to invest a sizeable chunk of money.

The Saga three and five year bonds pay rates of 3.85% and 4.50% respectively – both more than the current rate of inflation.

Similarly, the five year Northern Rock Fixed Rate Bond Issue 414 pays a rate of 4.15%.

Savers also have the option of gazumping inflation, while also making a donation to the British legion, as Coventry BS's two year Poppy Bond pays a rate of 3.50% on deposits of more than £500.

Higher band taxpayers have a measly choice of two accounts.

"It is difficult for savers, at best they should try to stay within an arms length of inflation and try to weather the storm of low rates and high inflation," commented Darren Cook of

"The average instant access savings rate is still at rock bottom at a rate of only 0.79%.

"The only trigger for any improvement in savings rates may be a surprise increase in the Bank of England's base rate but this is not likely to happen soon despite the increase in the rate of inflation."

"It is likely that the New Year may bring further bad news for savers as the increase in VAT is likely to add to the inflationary headache."

Find the best savings rates for you - Compare savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Savings rates plummet to fresh lows yet again

It’s becoming a recurring theme, and unfortunately, it’s showing no signs of stopping. Savings rates have plummeted to fresh lows once again as the impact of the base rate cut continues – and this month, product availability has followed.

Less than half of savings accounts beat inflation

Official figures show that inflation jumped up during September, with CPI rising to 1%. Not only does this mean that consumers may begin to feel the impact on their wallets, but there are now far fewer savings accounts that will beat inflation.

Number of savings accounts falls to record low

As if the continued drop in savings rates wasn’t bad enough, our latest research reveals another blow to already hard-pressed savers, with the number of accounts available having fallen to a record low.