Inflation drop to 1.8% makes life easier for savers
14 July 2009 / by Rebecca Sargent
The CPI annual inflation rate has dropped to 1.8 per cent, the latest statistics from the Office for National Statistics have revealed, making it easier for savers to get a real return on their cash.
At 1.8 per cent the CPI rate is now 0.2 per cent below the Government’s target rate of two per cent, which could be cause for concern for the Bank of England’s Monetary Policy Committee (MPC).
Nevertheless, the drop in CPI means that savers are now faced with a far bigger choice of savings accounts, Andrew Hagger at Moneynet.co.uk argues, as 1.8 per cent equates to a gross rate of 2.25 per cent for a basic rate tax payer and three per cent for a higher rate tax payer.
Commenting, Mr Hagger said: “Competition in the fixed rate bond sector has been fierce and as a result basic rate and higher rate tax payers will no longer find it a struggle to achieve a positive return on their savings.
“The incentive to save is well and truly back on the agenda,” he adds, “and for those relying on savings interest to supplement their fixed income, the outlook has vastly improved compared with just 6 months ago.”
Best buy fixed rate bonds, according to Moneynet.co.uk, include ICICI Bank fixed rate bonds and the Post Office Growth Bond amongst others, and interest rates are now topping five per cent for a five year investment.
Compare fixed rate bond deals »
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* 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 | ||||
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| Provider | Account | Interest Rate | Term | Apply |
|---|---|---|---|---|
 |
Up to 6 years |
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| 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.
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