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Savers’ inflation nightmare continues

Savers’ inflation nightmare continues

Category: Savings

Updated: 10/03/2015
First Published: 14/06/2011

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 It is now over 6 months old so the content may be out of date.

Savers still face an uphill struggle to maintain the purchasing power of their savings despite inflation holding steady in May.

The Office for National Statistics said Consumer Prices Index (CPI) inflation remained at 4.5% last month.

Retail Prices Index (RPI) inflation, which includes costs associated with housing, was also unchanged at 5.2%.

But despite the lack of movement, Moneyfacts.co.uk can reveal that the nightmare scenario facing those searching for an inflation-beating savings account continues.

While a basic rate taxpayer needs to find a savings account paying 5.63% per annum in order to stop their savings pot effectively eroding away, a higher rate taxpayer would require an account paying at least 7.5%.

This means that basic rate tax payers have just one account that they can turn to, a five year fixed rate ISA from Birmingham Midshires.

Unfortunately, higher rate taxpayers have nowhere to turn.

"The rate of inflation means hundreds of thousands of savers need accounts paying a staggering 5.63% before they earn a real rate of return on their savings," said Sylvia Waycot, spokesperson for Moneyfacts.co.uk.

"This is going to be pretty difficult bearing in mind the average interest offered on an easy access savings account is 0.89%.

"As the Government's 2% CPI target slips further beyond the Bank of England's grasp, it is the nation's savers who are left suffering the consequences of eroding spending power with little hope of rescue."

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