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Continuing High Inflation Means UK Savers Left High and Dry

Personal_Finance / Savings Accounts Sep 17, 2013 - 09:26 AM GMT

By: MoneyFacts

Personal_Finance

Inflation figures released today show the Consumer Prices Index (CPI) fell from 2.8% to 2.7% during August.

To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 3.38% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 4.5%.


Of the 840 ISA and non-ISA accounts in the market today, there are only three savings accounts that taxpayers can choose to negate the effects of tax and inflation.

The effect 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 £8,844.00 today.

Sylvia Waycot, Editor at Moneyfacts.co.uk, said:

“Inflation may have fallen but it is still high enough to ruin the spending power of any feeble interest paid on today’s savings accounts, which leaves the elderly reliant on savings income and the young saving for a house deposit high and dry.

“Taking into account the taxman’s share and the cost of living, savers need an account paying a hefty 3.38% before they earn a real rate of return and yet the average no-notice savings account only pays a miserable 0.67%.

“Just one year ago, there were 129 ISAs accounts that beat tax and inflation out of a total of 1,017 accounts. Today that choice has dropped to two ISAs.

“The average interest paid across the ISA range is just 1.70% and a year ago it was 2.39%.

“It is time to start calling savings accounts by a different name as ‘savings’ suggests growth and the reality is one of stagnation.”

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.


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