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 Moneyfacts.co.uk 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 Moneyfacts.co.uk.
"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."
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