Savings Accounts Under Threat from Inflation
19/08/2008
Savers should beware that billions of pounds are languishing in savings accounts that are losing value in real terms after the recent hike in inflation.
Top-rate taxpayers are unable to achieve a positive real return on money in any taxable savings account, while basic-rate taxpayers are finding it increasingly difficult. Even tax-free ISAs are largely failing to beat inflation, with almost 35% of them failing to add value in real terms.
The retail prices index (RPI) reached a new high of 5% in July, meaning higher-rate taxpayers need to achieve a gross return of 8.33% and basic-rate payers 6.25% in order to break even.
With the top savings rate at 7.2%, higher rate tax-payers need to find one of the 65% of ISAs that will give them some interest in real terms. Basic-rate taxpayers need to look for an ISA or one of the 278 notice, no-notice, fixed-rate and regular savings accounts that have rates over 6.25% on £10,000 balances.
It pays to shop around: less than a quarter of the inflation-beating accounts come from high street banks. 46% of the best savings accounts are offered by building societies.
Top-rate taxpayers are unable to achieve a positive real return on money in any taxable savings account, while basic-rate taxpayers are finding it increasingly difficult. Even tax-free ISAs are largely failing to beat inflation, with almost 35% of them failing to add value in real terms.
The retail prices index (RPI) reached a new high of 5% in July, meaning higher-rate taxpayers need to achieve a gross return of 8.33% and basic-rate payers 6.25% in order to break even.
With the top savings rate at 7.2%, higher rate tax-payers need to find one of the 65% of ISAs that will give them some interest in real terms. Basic-rate taxpayers need to look for an ISA or one of the 278 notice, no-notice, fixed-rate and regular savings accounts that have rates over 6.25% on £10,000 balances.
It pays to shop around: less than a quarter of the inflation-beating accounts come from high street banks. 46% of the best savings accounts are offered by building societies.
