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Five minute finance: Beating inflation

Five minute finance: Beating inflation

Category: Savings

Updated: 29/03/2010
First Published: 29/03/2010

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 It is now over 6 months old so the content may be out of date.

Even though inflation fell in February, it continues to take its toll on savers already suffering from dropping rates.

Research from suggests a basic rate tax payer currently needs to find an account paying 3.75% to combat the effects of inflation.

Yet at present, only two types of account are able to offer the level of interest required: regular savings accounts, where the amount that can be invested is restricted; and fixed rate bonds, in which a saver would have to leave their funds for a minimum of two years.

For a higher rate tax payer, a return of 4.98% is needed counter the effects of inflation - however, it is a level that is only achievable with a five year fixed rate bond.

By fully utilising their ISA allowance, savers can eliminate tax from the equation, lowering the level of return needed to break even.

With only a week to go before the end of the tax year, the ISA season is in full swing with a number of competitive deals on the market.

Over 50's given a boost

SAGA has launched its Telephone Saver account paying 2.75%, including a 1.00% bonus for 12 months. The account has a monthly interest option for those looking for a regular income and is open to savers aged 50 years and over. Savers can invest up to £1m into the telephone operated account. No notice is required to access funds, although all withdrawals must be made via a nominated account.

Scottish tempts ISA savers

Many ISA savers currently have large balances saved and are looking for an account paying a competitive rate of interest. The Scottish Building Society has launched its Fixed Rate ISA Saver paying 2.80% from £20,000 and 3.00% from £40,000. Further additions are permitted whilst the issue remains open, but access to funds is not available during the one year term.

Limitless returns

Cater Allen Private Bank has reissued its Capital Guaranteed Growth Plan 5. Investors can place between £10,000 and £1m into the plan, which tracks the FTSE 100 and pays 100% of any growth in the index. If the FTSE 100 falls during the 5½ year term, the plan guarantees 100% of investors' capital back at maturity. The plan is available until 4 June 2010, but may close earlier if over subscribed.

Rewards at a discount

Consumers looking for an account with extra benefits may be tempted by the Reward Current Account from Santander. It charges a fee of £10 per month, reduced to £5 per month for the first three months and comes with £460 a year worth of benefits, including worldwide travel insurance and national breakdown coverage with Green Flag. The account also benefits from a market leading interest rate of 5.00% for the first year and offers a competitive overdraft rate of 12.9%. Monthly funding of £1,000 is required.

Find the best savings account for you - Compare best selling savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.