Savers have once again been left to sing the blues after inflation climbed higher in August.
The Office for National Statistics said Consumer Prices Index (CPI) inflation increased to 4.5% last month, up from 4.4% in July, thanks largely to rises in the prices of clothing, footwear, petrol and energy.
Retail Prices Index (RPI) inflation, which includes costs associated with housing, rose to 5.2% from 5%.
Sadly for savers, the rise means the nightmare scenario facing those searching for an inflation-beating savings account continues.
According to Moneyfacts.co.uk, 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.
This means that basic rate taxpayers have just five accounts that they can turn to, all of which are fixed rate ISAs.
The impossible task for a higher rate taxpayer is to find an account paying at least 7.5%, while there are also no accounts that can beat RPI.
The effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20%, would have the spending power of just £9,345 today.
"Inflation continues to whittle away any hope of a decent return on the nation's savings," said Sylvia Waycot, spokesperson for Moneyfacts.co.uk.
"Without any hope of respite, all savers can do is sing the blues as they watch their spending power disappear down the Swanny.
"Today's rate of inflation means hundreds of thousands of savers need accounts paying a staggering 7.50 per cent before they earn a real rate of return on their savings.
"Anything less means they will fall into 'the eroding spending power trap' which has already wiped £655 off the spending power of £10,000 in just five years."
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