UK Inflation Falls But Savers Continue to Get Raw Deal
Personal_Finance / Savings Accounts Aug 19, 2014 - 03:12 PM GMTBy: MoneyFacts
Inflation figures released today show that the Consumer Prices Index (CPI) fell from 1.9% to 1.6% during July.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 2% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 2.67%.
Of the 650 non-ISA accounts in the market today, there are 86 that basic rate taxpayers can choose to negate the effects of tax and inflation.
ISAs, however, present a slightly better picture with 84 out of 223 offering rates that beat 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 £8,713 today – a fall of 12.87%.
Sylvia Waycot, Editor at Moneyfacts.co.uk, said:
“Today there are a total of 873 savings accounts on the market, but only 170 (86 fixed bonds and 84 ISAs) pay enough interest to negate the effects of tax and inflation*.
“The average easy-access account pays a miserable 0.66% as opposed to 0.67% last year.
“The average interest paid across the ISA range is just 1.56%, while a year ago it was 1.66%.
“However, last year inflation hit 2.8% and Moneyfacts reported that there was only one savings account on the market that paid an interest rate that negated the effects of tax and inflation.
“Today, although savings rates are disheartening, savers do at least have a few accounts they can choose from that will leave them with some form of return after tax and inflation pressures.
“But until all accounts do this, savers will continue to get the raw deal that the industry appears to consider acceptable.”
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.
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
