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Dark Days Continue for UK Savers

Personal_Finance / Savings Accounts Aug 13, 2013 - 06:33 AM GMT

By: MoneyFacts

Personal_Finance

Inflation figures released today show the Consumer Prices Index (CPI) fell from 2.9% to 2.8% during July.

To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 3.50% per annum, while a higher rate taxpayer at 40% needs an account paying at least 4.66%.


Of the 804 ISA and non-ISA accounts in the market today, there is only one savings account that basic rate 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 £8,842 today.

 

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“These are dark days for savers as there is only one standard savings account to beat basic rate tax and inflation, a seven-year bond which is a long commitment. 

“Savers would be wise to be wary of locking their money away for the long term. The market remains volatile so opting for an easy access account to move money more freely is a safer option.

“Inflation is expected to remain above the 2% target for some time, so it’s a bleak forecast when it comes to saving, especially for those relying on interest to supplement their income.

“This time last year savers could get 3.50% in a two-year bond, but today they would need to invest for a staggering seven years to get the same return.

“Only one year ago there were 227 accounts out of a total of 1,092 that beat basic rate tax and inflation, including 128 ISAs. There are now 288 less accounts on the market today because of the damaging effect of the Funding for Lending Scheme (FLS).

“Any change to the Bank of England Base Rate in the foreseeable future is not a guarantee that savings rates will rise.

“Sadly, as the FLS is set to continue until the end of next year, savers’ wishes for better returns are unlikely to be granted anytime soon.”

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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