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UK Savings and September 1.2% CPI Inflation

Personal_Finance / Inflation Oct 14, 2014 - 12:32 PM GMT

By: MoneyFacts

Personal_Finance

Inflation figures released today show that the Consumer Prices Index (CPI) fell from 1.5% to 1.2% during September.

To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 1.5% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 1.9%.

Of the 621 non-ISA accounts in the market today, there are 170 that basic rate taxpayers can choose to negate the effects of tax and inflation.


ISAs, however, present a slightly better picture with 152 out of 212 offering rates that beat 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 £8730 today – a fall of 12.70%.

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

“Despite this being the first time in two years an easy access or notice account beats inflation, the savings market remains in a dire state with the fall in inflation actually making little difference to savers.

“Today there is a total of 833 savings accounts on the market, but only 322 (167 fixed bonds, 152 ISAs, 3 no notice accounts and 5 notice accounts) pay enough interest to negate the effects of tax and inflation*.

“Even with the new £15,000 ISA limit savers’ funds are just not wanted by providers, which is an after effect from the Government-backed Funding for Lending Scheme.

“The average interest paid across the ISA range pays a miserable 1.56% as opposed to 1.70% last year.

“Five years ago, savers could get 3.75% in a no notice account, but today they would need to invest for a staggering seven years to get 3.52%.

“What savers want is the return of real competition in the savings market and some realistic deals on offer.” 

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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