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Ray of inflation hope for savers

Ray of inflation hope for savers

Category: Savings

Updated: 12/04/2011
First Published: 12/04/2011

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 It is now over 6 months old so the content may be out of date.

A small chink of light has appeared at the end of a long tunnel for savers searching for an inflation-beating savings account after official figures revealed a surprise drop in inflation in March.

The Office for National Statistics said record falls in the price of food and non-alcoholic drinks helped push Consumer Prices Index (CPI) inflation lower to 4% last month, down from 4.4% in February.

Retail Prices Index (RPI) inflation, which includes costs associated with housing, slipped to 5.3%, down from the 20 year high of 5.5% seen in February.

Although the drop spells better news for savers, Moneyfacts.co.uk revealed that the task facing those searching for an inflation-beating savings account remains a tricky one.

A basic rate taxpayer needs to find a savings account paying 5% per annum in order to stop their savings pot effectively eroding away, of which only 25 are currently available.

A higher rate taxpayer would require an account paying at least 6.67%, of which there are no accounts available.

Of significant concern is the news that none of the accounts currently on the market pay a rate high enough for any taxpayer to beat RPI inflation.

Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said whilst the fall in inflation was welcome, it would not change the fortunes of the nation's savers.

"CPI is still double the Government's 2% target, which spells desperate times for savers who have almost nowhere to place their money to beat inflation."

"Pensioners trying to supplement their income with interest will feel the ensuing pain the most.

"Over the last six months the number of savings accounts that beat inflation for basic rate taxpayers has dropped from 118 to 25 today, 24 of which are fixed rate ISAs.

"But cash ISAs limit the amount of investment and therefore return, which is yet a further hindrance when trying to make ends met."

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