To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 6.5%, while a higher rate taxpayer at 40% needs to find an account paying at least 8.67%.

Taxpayers have a choice of just five inflation-tracking accounts whilst there are no regular accounts that beat inflation in today’s market.

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 £9,309 today.

Sylvia Waycot, spokesperson for Moneyfacts.co.uk, said:

“Inflation continues to spiral upwards whilst savers interest remains in the doldrums.

“Today’s news offers absolutely no hope for anyone relying on savings interest to help pay for rising food and fuel bills.

“The rate of inflation means hundreds of thousands of savers need accounts paying an unattainable 6.5% before they earn a real rate of return on their money.

“Anything less means they will fall into ‘the eroding spending power trap’ which has already wiped almost £700 off the spending power of £10,000 in just five years.

“Over the last year the number of savings accounts that beat inflation for basic rate taxpayers has dropped from 31 to a miserable five today, two of which are structured products that may not appeal to risk adverse savers.”

Inflation linked accounts (RPI)

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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