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Inflation falls to two-and-a-half year low

Inflation falls to two-and-a-half year low

Category: Economy

Updated: 19/06/2012
First Published: 19/06/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Consumer Prices Index (CPI) rate of inflation has fallen to its lowest level for two-and-a-half years.

The Office for National Statists (ONS) said the UK rate of inflation fell from 3.1% to 2.8% in May, catching some experts by surprise.

It had been expected that CPI would remain unchanged during the month.

It means that inflation has fallen consistently from last September, when it reached 5.2%.

After the latest fall in inflation, analysis shows that to beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 3.50% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 4.70%.

Today there is a choice of 210 standard savings accounts that taxpayers can choose from to negate the impact of tax and inflation – a significant rise from the 159 products in April.

There are 123 ISAs that beat inflation - helped by their tax advantage - though they are limited by the amount that can be invested (£5,640 per annum).

By comparison, there are 87 non-ISA accounts that beat inflation, all of which are fixed rate bonds.

"Today's rate of inflation means hundreds of thousands of savers need an account paying a hefty 3.50% before they earn a real rate of return on their savings," said Sylvia Waycot, spokesperson for

"Yet, the average no notice savings account only pays a disappointing 1.05% showing the size of the problem many are facing."

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