To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 1.25% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 1.67%.

Of the 632 non-ISA accounts in the market today, there are 210 that basic rate taxpayers can choose to negate the effects of tax and inflation.

ISAs, however, present a slightly better picture with 155 out of 201 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 £8,745 today – a fall of 12.55%.

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

“The rate of inflation may have fallen but it is still going to be a ‘Bah humbug’ Christmas for savers thanks to the paltry interest paid on savings.

“Many older savers will be dreaming of the new Pensioner Bond, but I doubt there will be enough to go round and fear it will cause even more heartache for those who miss out.

“The rest of us have a total of 365 savings accounts (176 fixed bonds, 19 notice, 15 no notice and 155 ISAs) to choose from that pay enough interest to negate the effects of tax and inflation*.

“The average interest paid across the ISA range is just miserable at 1.45%, even less than last year when it was 1.65%.

“Inflation has hit a 12 year low which has made a difference to the number of accounts that can beat tax and inflation. However, for any real difference to be felt, savers especially those reliant on savings income to fund retirement, are still desperate for an overall improvement on the savings rates offered.

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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