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Savers shown how to win inflation battle

Savers shown how to win inflation battle

Category: Savings

Updated: 18/02/2013
First Published: 23/03/2010

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 It is now over 6 months old so the content may be out of date.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 urged to use their ISA allowance as the battle to beat the effects of inflation continues.

According to the Office for National Statistics, annual consumer prices index inflation fell to 3% last month, down from 3.5% in January, with a drop in the cost of recreation and culture, along with a reduction in gas bills, all having an impact.

However, with savings rates still struggling along at low levels, the need for savers to make their money work as hard as possible still remains.

Research from Moneyfacts.co.uk suggests a basic rate tax payer needs to find an account paying at least 3.75% in interest to stop their savings pot eroding away.

For a higher rate tax payer, hunting down an account which pays 4.98% is the considerable challenge.

At present, only two types of account are available that can provide the level of interest necessary to combat tax and inflation:
1. Regular saver accounts, where the amount that can be invested is limited.
2. Fixed rate bonds, where savers would have to tie their money up for a minimum of two years to achieve the desired return.

"Despite the fall, inflation continues to erode the value of savers' money and with rates also declining, savers are being dealt a double blow," said Michelle Slade, spokesperson for Moneyfacts.co.uk.

"Prudent savers are being neglected and are finding it virtually impossible to combat the effects of tax and inflation.

"By taking full advantage of their ISA allowance, savers can lower the level of return needed by eliminating tax from the equation.

"From 6 April 2010, ISA savers will be able to invest more money tax-free, when the annual ISA allowance increases to £10,200 for all.

"After suffering some of the lowest rates on record in the last year, savers will be hoping that when the Chancellor delivers his Budget speech he will bring them some good news."

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

 
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