To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 3.37% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 4.50%.

Although there are 844 standard savings/ISA accounts in the market, only three ISAs negate the impact of tax and inflation regardless of your tax position.

The impact 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 £9,016 today.

Sylvia Waycot, finance expert for Moneyfacts.co.uk, said:

“2013 is starting out as a dreadful year for savers with little hope of change.

“Providers are not even pretending to offer competitive rates and with no real interest to be earned, inflation is really going to bite the weary saver.

“Today’s inflation news means that once again our money won’t buy us as much as we expect it to.

“Since August last year, when the Government launched its Funding For Lending Scheme, the savings market has become unrecognisable; products have been withdrawn, those that remain have had the rates cut and bonuses are fast becoming a thing of the past. Throw inflation into the mix and it spells intense misery.

“All ages of society are affected by this, from the young trying to save deposits for first homes, to the elderly who are reliant on savings as an additional stream of income to supplement their pension.

“There isn’t a single no notice, notice or one-year bond that negates the effect of tax and inflation and only a paltry three ISAs, where the interest and tax advantage together beat inflation.

“Today the average no notice account pays 0.88%; this time last year the average paid on the same easy access account was 0.91%.”

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.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.