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Savers hit rock bottom as inflation soars

Savers hit rock bottom as inflation soars

Category: Savings

Updated: 22/03/2011
First Published: 22/03/2011

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 It is now over 6 months old so the content may be out of date.

The task facing savers searching for an inflation-beating savings account just got even tougher after official figures revealed inflation soared to its highest level for more than two years in February.

The Office for National Statistics said rises in the costs of food, fuel and clothing drove Consumer Prices Index (CPI) inflation higher to 4.4% last month, up from 4% in January.

Retail Prices Index (RPI) inflation, which includes costs associated with housing, has reached 5.5%, its highest level for 20 years.

Following the announcement, Moneyfacts.co.uk revealed that the task facing those searching for an inflation-beating savings account had been made almost impossible.

The latest rise in inflation means a basic rate taxpayer needs to find a savings account paying 5.5% per annum in order to stop their savings pot effectively eroding away, of which only eight are currently available.

A higher rate taxpayer would require an account paying 7.3%, of which there are no accounts available.

None of the accounts currently on the market pay a rate high enough for any taxpayer to beat RPI inflation.

Sylvia Waycot, spokesperson for Moneyfacts, said the high inflation environment was hurting both young and old alike.

"The continual rise in inflation compounds the misery of pensioners who rely on savings to supplement their income, while people trying to save a deposit for a first home will see inflation eating into their savings faster than it grows.

"Over the last six months the number of savings accounts that beat inflation for basic rate taxpayers has dropped successively from 118 to only eight today, all of which are fixed rate ISAs.

"But cash ISAs limit the amount of investment and therefore return, which is yet a further hindrance when trying to make ends met."

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