Savers receive welcome lift as inflation slips low - Savings - News - Moneyfacts

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Savers receive welcome lift as inflation slips low

Savers receive welcome lift as inflation slips low

Category: Savings

Updated: 14/02/2012
First Published: 14/02/2012

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 It is now over 6 months old so the content may be out of date.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 received a welcome boost after inflation dropped lower in January.

The Office for National Statistics said Consumer Prices Index inflation fell to 3.6% last month, down from 4.2% in December.

The drop was largely due to the impact of last year's VAT rise dropping out of the calculation, while a slowdown in the rise in prices of commodities and oil also played a part.

Retail Prices Index inflation, which includes costs associated with housing, fell to 3.9% from 4.8%.

According to Moneyfacts.co.uk, the drop brings some respite to savers who have recently struggled to find savings accounts paying enough to negate the effects of inflation.

Indeed, a basic rate taxpayer needs to find a savings account paying 4.5% per annum in order to stop their savings pot effectively eroding away.

At present, there are 47 such standard savings accounts currently available, a vast improvement on the grand total of eight which were on offer last month, when a rate of 5.25% was needed.

Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said the drop heralds a change in fortunes for savers, but warned they will still need to be on their toes if they are to make the most of their money.

"Today's accounts favour introductory offers which mask the lower rate that is applied on first anniversaries," she added.

"This means savers need to change their habits from mild interest to a state of ready alertness to changes in the savings account market.

"Today's rate of inflation means hundreds of thousands of savers need an account paying a hefty 4.50% before they earn a real rate of return on their savings and yet the average no notice savings account only pays a miserly 0.92% which shows the size of the problem.

"The number of savings accounts that beat inflation has risen from a miserly eight last month to a much more respectable 47 today, many of which are fixed rate ISAs.

"However, this is a small blessing when compared to the total number of standard savings accounts available which is 1,100."

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