Inflation figures released today show the Consumer Prices Index (CPI) remained at 2.7% during November.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 3.37% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 4.50%.
Today there is a choice of 6 accounts that savers can choose from as there are no non-ISA accounts available for basic and higher rate taxpayers.
The impact of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20%, would have the spending power of just £9,004 today.
Sylvia Waycot, finance expert for Moneyfacts.co.uk, said:
“Savings are being hit from all sides; the Government’s Funding for Lending Scheme, which was supposed to kick-start the mortgage market, has in fact caused an unprecedented fall in savings rates.
“And now to rub salt into the wound, there is the added misery that there is no easing on how much inflation eats into the real spending power of savings.
“We have entered a period of not only plunging savings rates, but many products being withdrawn, so investors face a real struggle to generate any sort of real return.
“All ages of society are affected by this, from the young trying to save deposits for their first homes, to the elderly who are reliant on savings as an additional stream of income to supplement their pensions.
“Today there are 877 savings accounts on the market, but only 6 (ISAs) accounts that negate the effects of inflation. There are no easy access accounts, notice accounts or fixed bonds on the market that beat inflation.
“Today the average easy access account pays 0.91%; this time last year the average paid on an easy access account was 0.93%.”
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