Inflation rise means savers lose out
20 April 2010 / by Lois Avery
An unexpected rise in inflation is set to further punish savers, who are already struggling to get a good deal on their investments.
Figures released today by the Office for National Statistics show that the Consumer Price Index (CPI), the government’s inflation target measure, jumped to 3.4%, as higher-priced petrol, gas bills and plane tickets contributed to a rise in the cost of living.
According to Moneyfacts.co.uk the increase in inflation means that savers could see their savings pots effectively eroding away because accounts offering interest rates high enough to offset the effects of a inflation do not currently exist.
Figures show that in order to combat the rise a basic rate tax payer must find an account paying 4.25%, and a higher rate tax needs an account paying 5.64% in interest just to break even, let alone see a return on their savings.
Michelle Slade, spokesperson for Moneyfacts.co.uk said: “Prudent savers continue to be neglected and are finding it virtually impossible to combat the effects of tax and inflation. The majority of products that do beat tax and inflation also require you to open a more riskier investment product or hold a current account with the provider.
“Many savers, particularly pensioners, use the interest on their savings to supplement their income. Record low interest rates have already greatly reduced the income they receive on their money and rising inflation just exacerbates the problem.
“In normal circumstances such a high level of inflation would likely see the Bank of England raise base rate, but these are not normal economic conditions. For savers a rise in bank rate can’t come soon enough.”
In order to counter-act the inflation rise savers should think about switching to accounts with higher interest rates. At the moment basic rate tax payers have a choice of 44 accounts that offer rates enabling them to break even, while only 4 accounts are available to higher rate tax payers.
The good news is for those investing in a tax free Isa wrapper, a rate in excess of 3.4% is needed to see a return and there are four cash Isas available that meet this.
Click here to compare savings deals »
© Fair Investment Company Ltd
| Sorry, your search has returned no results. |
* Income payments and returns are dependent upon the FTSE 100 Index.
| Provider | Account | Interest Rate (AER) | Term | Apply |
|---|---|---|---|---|
 The Access Bank UK » |
3 Year Fixed Rate |
2.20% per annum |
£5,000 | Apply Now > |
| Earn 2.20% fixed interest – 3 year term – Minimum deposit £5,000 – No withdrawals permitted. FSCS Protected | ||||
The Access Bank UK » |
2 Year Fixed Rate |
2.02% per annum |
£5,000 | Apply Now > |
| Earn 2.02% fixed interest – 2 year term – Minimum deposit £5,000 – No withdrawals permitted. FSCS Protected | ||||
 Vanquis Bank » |
4 Year Fixed Rate Bond |
2.40% per annum |
£1,000 | Apply Now > |
| Earn 2.40% gross/AER fixed for 4 years. Save £1,000 – £250,000. No withdrawals during the term. Individual or joint accounts available. Annual or monthly interest. FSCS Protected | ||||
The Access Bank UK » |
1 Year Fixed Rate |
1.72% per annum |
£5,000 | Apply Now > |
| Earn 1.72% fixed interest. 1 year term, save from £5,000 to £500,000, no additional deposits or withdrawals permitted, FSCS Protected | ||||
Vanquis Bank » |
3 Year Fixed Rate Bond |
1.85% per annum |
£1,000 | Apply Now > |
| Earn 1.95% gross/AER fixed for 3 years. Save £1,000 – £250,000. No withdrawals during the term. Individual or joint accounts available. FSCS Protected | ||||
| Sorry, your search has returned no results. |
| Provider | Account | Interest Rate | Term | Apply |
|---|---|---|---|---|
 |
Up to 6 years |
|||
| Capital protected deposit plan with the potential to mature after years 3, 4, 5 and 6. If the plan matures early it will return 5% times the number of years the plan has been in force. Also available for Cash ISA and ISA transfer. | ||||
* Income payments and returns are dependent upon the FTSE 100 Index.
| Provider | Account | Interest Rate (AER) | Term | Apply |
|---|---|---|---|---|
 RCI Bank » |
Freedom Savings Account | 1.30% | Instant Access | More Info > |
| MARKET LEADING. Earn 1.30% gross/AER. Instant Access. No notice periods. Unlimited payments and withdrawals. Pay in from £100. RCI Bank are protected up to a total of €100,000 by the FGDR, the French deposit protection scheme. Manage account online. | ||||
 Ford Money » |
Flexible Saver |
1.22% |
Instant Access | More Info > |
| Earn 1.22% AER variable interest. Interest can be paid monthly or annually. Open an account singly or jointly. Minimum deposit £1. Unlimited deposits and withdrawals permitted. FSCS Protected | ||||
 AA Savings » |
Easy Saver | 1.15% | Easy Access | More Info > |
| 1.15% gross/AER. Instant Access. Free withdrawals and no notice period. Deposit from £100. Includes a fixed bonus of 0.95% gross fixed for the first 12 months. Quick and easy online application | ||||
 Aldermore Bank » |
Easy Access Account | 1.00% | Easy Access | More Info > |
| 1.00% gross/AER on balances from £1,000 to £1 million. Unlimited withdrawals without restriction or loss of interest. | ||||
Gross is the interest you will receive before tax is deducted.
AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.
| Sorry, your search has returned no results. |
$(document).ready(function(){ $("#ctl13_GeneralComparisonTabsTable1_divTablesWraper .comparison_table_tabs_container a").click(function(){ var $this = $(this); var TableStyle = ''; var $tab;
if (TableStyle=='uswitch') $tab = $this.parent('li'); else $tab = $this.parent('div').parent('div').parent('td');
var $activeTab = $('#ctl13_GeneralComparisonTabsTable1_divTablesWraper .comparison_table_active_tab');
if ($tab.attr('class')=='comparison_table_active_tab'){ return false; }
$activeTab.removeClass('comparison_table_active_tab'); $activeTab.addClass('comparison_table_inactive_tab');
$tab.removeClass('comparison_table_inactive_tab'); $tab.addClass('comparison_table_active_tab');
$('#ctl13_GeneralComparisonTabsTable1_divTablesWraper .TableTabDiv').hide(); $('#ctl13_GeneralComparisonTabsTable1_divTablesWraper #' + this.className).show();
return false; }); });
function openFactSheet(url) { var w = window.open(url, '', 'width=1000,height=800,scrollbars=yes,resizable=yes'); w.focus(); }