Inflation has risen slightly over the past month, according to the Consumer Price Index, the official measure for price conditions in the UK.
The CPI has risen for the first time in several months, from 2.4 per cent in June to 2.6 in July. This is bad news for savers, as research conducted by price comparison site Moneyfacts suggests that in order to beat inflation a bank account paying at least 3.25 per cent annually will be needed, or at least 4.3 per cent for those paying higher rate tax.
Inflation, coupled with tax and lower interest rates mean that £10,000 invested five years would have the equivalent spending power of £9243 today. Moneyfacts representative Sylvia Waycot said: “We are currently in a ludicrous situation where more savings accounts don’t beat inflation than do.”
Market analysis shows that just 227 of the 1092 savings products on the market today are strong enough to negate the effects of tax and inflation. 128 of these are ISA’s, 96 are fixed rate accounts and three are accounts requiring notice to withdraw. There are no instant access accounts that beat inflation.
There are various accounts on the market where savers can at least break even; While its important to shop around for the best deal, Ms Waycot added: “it is important that when savers spot an account they fancy, not to hang around. The choice of savings accounts has shrunk over the past month, clear evidence that the best accounts disappear like magic”..