22 Dec 2024

Savers’ Torment Heightened

Inflation figures released today show the Consumer Prices Index (CPI) rose during February, from 2.7% to 2.8%.

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

Although there are 869 standard savings accounts in the market, not a single non-ISA account negates the impact of tax and inflation regardless of your tax position. Even with the tax advantage, there are only five cash ISAs that beat inflation.

The impact 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 £8,884 today.

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

“Savers’ torment has been heightened today with the news that inflation has risen once again and spending power has fallen.

“Savers’ desperately need accounts that will protect them against the harshness of today’s cost of living.

“When depositing whatever savings you have, the very least you expect is that when you take it out again, it can buy you as much as it originally did.

“Infuriatingly, once tax has been deducted, the remaining interest paid on the majority of accounts hasn’t a hope of meeting this need.

“Even the darling of the savings market, the cash ISA, struggles to lend a hand with only five out of 253 ISAs matching or beating inflation.

“Today, the average easy access account pays 0.77% as opposed to 0.98% last year.

“Settling for a fixed bond today will give you a much lower return of interest compared to this time last year, when you could get 3.85% over a two-year deal, compared to under 3% today."

Cash ISAs
Provider	Account	Rate	Notes
Coventry BS	60 Day Notice ISA (3)	2.80%	Earlier access on 60 day loss of interest.Rate includes 0.60% bonus for 12 months. Transfers of 2012/13 ISAs permitted.
Source Moneyfacts.co.uk Compiled 19.3.13

Fixed Cash ISAs
Provider	Account	Rate	Notes
Halifax	ISA Saver Fixed - 5 Year Bond	3.10%	Earlier access on closure only on 365 day loss of interest.Can apply online.
Halifax	ISA Saver Fixed - 4 Year Bond	3.05%	Earlier access on closure only on 320 day loss of interest.Can apply online.
Halifax	ISA Saver Fixed - 3 Year Bond	3.00%	Earlier access on closure only on 270 day loss of interest.Can apply online.
Santander	Major ISA 2 Year Fixed Rate	2.80%	Earlier access on closure only on 120 day loss of interest and loss of bonusone-off 0.10% bonus paid on maturity if Rory McIlroy wins an eligible golf "Major"
Source Moneyfacts.co.uk Compiled 19.3.13

Moneyfacts Group

Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

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