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Record inflation rise hits savers

Record inflation rise hits savers

Category: Savings

Updated: 19/01/2010
First Published: 19/01/2010

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 It is now over 6 months old so the content may be out of date.

Savers have been struck another blow after UK inflation witnessed its biggest ever monthly rise in December.

According to the Office for National Statistics, annual consumer price index inflation leapt to 2.9% last month, up from 1.9% in November and the first time the rate has exceeded the Government target of 2% since May last year.

However, with savings rates seemingly having hit rock bottom, the rise represents further bad news for savers.

Research from Moneyfacts.co.uk suggests basic rate taxpayers currently need to find a savings account paying at least 3.63% in interest to prevent their savings pot being eroded away, while for a higher rate taxpayer, the challenge is to locate an account paying 4.81%.

However, there are currently no variable rate accounts paying interest above 3.63%, while the average rate on no notice accounts is hovering around 0.75%.

The real return after basic tax and inflation on no notice accounts has dropped to minus 2.30%, the lowest level seen since February last year.

"Inflation is starting to make its unwelcome mark on people's spending power and with savings interest rates stuck at their historical low, savers must make sure they shop around to find absolutely the best rates on offer," said Darren Cook, spokesman for Moneyfacts.co.uk.

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