Dead end for savers, says MoneyFacts
Published ¤ 18/06/2013 09:58:46
Inflation figures released today show the Consumer Prices Index (CPI) rose from 2.4% to 2.7% during May. This means that 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 4.50%.
Although there are 820 standard savings accounts in the market today, there is not a single savings account 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 £8,852 today.
Sylvia Waycot, Editor at Moneyfacts.co.uk, said "It's bad enough that today's rise in inflation will reduce the spending power of the pound in our pockets, but the miserable returns on savings accounts mean there are few pounds in our pockets to start off with.
"Savers will be horrified to know that there are no standard savings accounts that beat or match the rate of inflation.
"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 0.70%.
"In contrast, a year ago, there were 123 ISAs and 87 non-ISA accounts that beat tax and inflation despite BoE base rate being static at 0.5% and CPI standing at 2.8%.
"Tax and inflation leave slim pickings for savers and being proactive about getting the best deal has never been more relevant. Check each anniversary that you are still in the best account and vote by moving your cash if you aren't."
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