Inflation, the Curse of Savers, Savings Accounts that Track RPI
Personal_Finance / Inflation Nov 15, 2011 - 05:36 AM GMTBy: MoneyFacts
Inflation figures released today show the Consumer Prices Index (CPI) fell during October from 5.2% to 5.00%.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 6.25% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 8.33%.
Today there is not a single standard savings account that taxpayers can choose to negate the effects of tax and inflation whether it be CPI at 5% or RPI at 5.4%.
The effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20 per cent, would have the spending power of just £9,239 today.
Sylvia Waycot, spokesperson for Moneyfacts, said:
“The small drop in inflation announced today will not be enough to curb the woes of the nation’s savers.
“With returns so low and inflation unsteady, people don’t know which way to turn; to inflation-proofing accounts which will protect them against inflation rises but will return less if inflation falls, or to hold out in a savings account that pays a poor return now but which could pay better if inflation falls. It is a really difficult choice.
“Today’s rate of inflation means hundreds of thousands of savers need accounts paying a staggering 6.25% before they earn a real rate of return on their savings.
“Anything less means they will fall into ‘the eroding spending power trap’ which has already wiped almost £800 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 successively from 91 to absolutely none which leaves savers in an impossible position.”
This chart represents accounts that will track inflation (RPI) rather than beat it.
Inflation linked accounts (RPI)
Provider |
Account |
Rate |
Term |
Minimum Investment |
BM Savings |
3 Year Inflation Rate Bond (Issue 3) |
RPI inflation rate plus 0.25% gross |
19.12.14 |
£500 |
BM Savings |
5 Year Inflation Rate Bond (Issue 4) |
RPI inflation rate plus 0.50% gross |
19.12.16 |
£500 |
BM Savings |
3 Year Inflation Rate ISA (Issue 2) |
RPI inflation rate plus 0.25% gross |
19.12.14 |
£500 |
BM Savings |
5 Year Inflation Rate ISA (Issue 2) |
RPI inflation rate plus 0.50% gross |
19.12.16 |
£500 |
Post Office |
Inflation-Linked Bond Issue 3 |
RPI inflation rate plus 0.25% gross fixed each year, paid at maturity |
23.2.15 |
£500
|
Post Office |
Inflation-Linked Bond 3 |
RPI inflation rate plus 1% gross fixed each year, paid at maturity. |
24.2.17 |
£500
|
Santander |
Inflation-linked Bond Issue 7 |
100% of the growth in the Retail Prices Index (RPI), or a guaranteed minimum return of 10%, plus the original investment returned |
1.1.18 |
£1 |
Yorkshire BS |
Protected Capital Account – Inflation-linked 10 |
100% of the growth in the Retail Prices Index (RPI), plus original investment returned |
1.02.18 |
£3,000 |
Source: Moneyfacts.co.uk 15.11.11 |
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