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Savers suffer as inflation gathers pace

Savers suffer as inflation gathers pace

Category: Savings

Updated: 16/12/2009
First Published: 16/12/2009

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 It is now over 6 months old so the content may be out of date.

More misery has been heaped on savers after official figures revealed the rise of UK inflation gathered pace in November.

The Office for National Statistics said consumer price index (CPI) inflation had jumped to an annual rate of 1.9% last month, up from 1.5% in October.

Driven predominantly by rises in fuel prices, it is the highest rate recorded since May, and looks set to rise further still when VAT reverts to 17.5% in the new year.

Unfortunately for savers, this means that the real return on an average no notice savings account after basic tax and inflation now stands at minus 1.25%, the lowest since May this year, according Moneyfacts.co.uk.

"Low bank base rates are designed to encourage savers to plough their savings back into the economy, but this serves little or no benefit to those who rely on interest from their hard earned wealth to subsidise their income," said Darren Cook, spokesman for Moneyfacts.co.uk.

"Savers need to secure a gross return on their savings of at least 2.38% to break even. Higher rate taxpayers need to achieve the near impossible, by trying to find savings rates that return at least 3.17%."

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