Inflation sting for savers

| February 18, 2010 | 0 Comments
Inflation sting for savers

With inflation now above 3.5% it has become close to impossible for savers to get a real return on their savings.

Instant access accounts pay an average interest rate of 0.86% gross, equivalent to 0.69% for a basic rate taxpayer and 0.52% for a higher rate taxpayer.

This is compared to inflation of 3.7% according to the Retail Prices Index (RPI), and 3.5% according to the Consumer Prices Index (CPI).

“The stark reality is that there are now no taxable instant access or notice accounts that will give a real rate of return to even a basic rate taxpayer let alone a higher rate taxpayer,” said David Black, banking specialist at financial analysts Defaqto.

“Those reliant on savings interest to supplement inadequate income will be devastated by this double whammy of rising inflation and low interest rates.”

He added that the number of accounts - including ISAs and bonds - paying interest at above the rate of inflation “barely reaches double figures”.

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