UK Savings and September 1.2% CPI Inflation
Personal_Finance / Inflation Oct 14, 2014 - 12:32 PM GMTBy: MoneyFacts
Inflation figures released today show that the Consumer Prices Index (CPI) fell from 1.5% to 1.2% during September.
To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 1.5% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 1.9%.
Of the 621 non-ISA accounts in the market today, there are 170 that basic rate taxpayers can choose to negate the effects of tax and inflation.
ISAs, however, present a slightly better picture with 152 out of 212 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 £8730 today – a fall of 12.70%.
Sylvia Waycot, Editor at Moneyfacts.co.uk, said:
“Despite this being the first time in two years an easy access or notice account beats inflation, the savings market remains in a dire state with the fall in inflation actually making little difference to savers.
“Today there is a total of 833 savings accounts on the market, but only 322 (167 fixed bonds, 152 ISAs, 3 no notice accounts and 5 notice accounts) pay enough interest to negate the effects of tax and inflation*.
“Even with the new £15,000 ISA limit savers’ funds are just not wanted by providers, which is an after effect from the Government-backed Funding for Lending Scheme.
“The average interest paid across the ISA range pays a miserable 1.56% as opposed to 1.70% last year.
“Five years ago, savers could get 3.75% in a no notice account, but today they would need to invest for a staggering seven years to get 3.52%.
“What savers want is the return of real competition in the savings market and some realistic deals on offer.”
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