The minor inflation drop off down to 5 per cent the previous month has done little to allay fears of savers that the returns on their savings accounts are not enough to make up for their interest rate shortfalls.
The only way for basic rate taxpayers to break even would be to find high interest savings accounts paying 6.25 per cent at a minimum, even with the lowered inflation rate. Meanwhile, Brits paying the higher rate need to somehow find a personal or business bank account provider offering around 8.3 per cent on a savings product just to break even.
With a dearth of such offerings currently on the market, some are making the suggestion that raising the ISA limit could aid in minimising real losses. As these accounts are tax free, they need not be nearly as high as their taxable savings counterparts, experts say, effectively acting as a higher rate without actually being so.
Consumers are turning in larger numbers to products linked to the inflation rate, which regularly require a long term investment of at least three years. However, inflation-linked accounts are risky in that if the inflation drops significantly – such as the Bank of England predicts it will next year – savers will undoubtedly miss out on other savings products that would have been more rewarding.
Many experts, such as David Black, an analyst for Defaqto, recommend savers should regularly review savings in order to maximise their returns. The best ways to get higher returns over longer terms is to use your ISA allowance every year, Mr Black said, while also keeping an eye on savings accounts’ guaranteed minimum rates and avail themselves of introductory bonuses as well.