To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 2.75% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 3.66%.

Of the 877 ISA and non-ISA accounts in the market today, there are 45 savings accounts 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 £8,836 today – a fall of 11.64%.

Sylvia Waycot, Editor at Moneyfats.co.uk, said:

“The cost of living may be falling but this has done nothing to aid the untold anguish felt by the nation’s savers who have witnessed the average interest paid on no-notice accounts fall by 0.37% in the last 12 months.

“Bearing in mind that the average no-notice savings account only pays a miserable 0.67% (or a £67 return based on a £10,000 investment in one year), savers have no hope of achieving the 2.75% needed just to counter the effects of inflation and pay the taxman’s share without locking money away which goes

“Today there are 877 savings accounts on the market but only 45 (20 fixed bond and 25 ISAs) accounts that negate the effects of tax and inflation.

“The average interest paid across the ISA range is just 1.68% and a year ago it was 2.18%.

“The increase in accounts that beat tax and inflation is not due to a sudden increase in competitiveness but merely a result of the larger than average fall in CPI.”

“What savers want is the return of real competition in the savings market and some realistic rates on offer.”

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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