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Savers suffer as inflation soars

Savers suffer as inflation soars

Category: Savings

Updated: 16/02/2010
First Published: 16/02/2010

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 It is now over 6 months old so the content may be out of date.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 continue to suffer after UK inflation rose to 3.5% in January, the highest annual rate seen in 14 months.

According to the Office for National Statistics, annual consumer prices index inflation increased to 3.5% last month, up from 2.9% in December, with the increase in the rate of VAT and higher fuel prices both playing their part.

However, with savings rates still falling, the rise represents another savage blow for savers.

Research from Moneyfacts.co.uk suggests basic rate taxpayers now need to find a savings account paying at least 4.38% in interest to prevent their savings pot being eroded.

For a higher rate taxpayer, the nigh on impossible challenge is to locate an account paying 5.83%, although some long term fixed rate bonds come close.

Meanwhile, with the average rate on no notice accounts now standing at 0.73%, the real return on such accounts after basic tax and inflation has dropped to minus 2.92%, the lowest level on record.

"Each month, inflation is cutting deeper into people's spending power and lower savings interest rates are creating an even more bitter pill to swallow," said Darren Cook, spokesman for Moneyfacts.

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