Savers’ struggles persist despite inflation fall - Savings - News - Moneyfacts

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Savers’ struggles persist despite inflation fall

Savers’ struggles persist despite inflation fall

Category: Savings

Updated: 17/01/2012
First Published: 17/01/2012

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 It is now over 6 months old so the content may be out of date.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' struggles to find an inflation-beating savings account are set to continue despite inflation seeing its largest monthly fall since April 2009 during December.

The Office for National Statistics said Consumer Prices Index inflation fell to 4.2% last month, down from 4.8% in November, thanks largely to a slowdown in the rise in prices of fuel and clothing.

Retail Prices Index inflation, which includes costs associated with housing, fell to 4.8% from 5.2%.

Yet despite the drop, Moneyfacts.co.uk data suggests the pain facing savers remains severe.

Indeed, a basic rate taxpayer needs to find a savings account paying 5.25% per annum in order to stop their savings pot effectively eroding away.

At present, there are only eight such standard savings accounts currently available, all of which are fixed rate ISAs.

A higher rate taxpayer would require an account paying at least 7%, none of which are currently available.

Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said the wheels of UK finance would shudder to a stop without the nation's savers and yet they are still seeing little reward for their investment.

"The few accounts with headline rates are often brief introductory offers making savers need as many heads as Medusa, just to keep abreast of fluctuating savings rates," she added.

"Today's rate of inflation means hundreds of thousands of savers need an account paying a hefty 5.25% before they earn a real rate of return on their savings and yet the average no notice savings account only pays a miserly 0.91%.

"This means more and more people are falling into 'the eroding spending power trap' which has already wiped nearly £800 off the spending power of £10,000 in just five years.

"Over the previous 12 months the number of savings accounts that beat inflation for basic rate taxpayers has dropped successively from a not very exciting 22 to only eight, which leaves savers feeling desperate."

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