Inflation rate still high; savings accounts feeling the squeeze

Savers are still finding it a struggle to procure savings accounts for themselves to counteract the still-high inflation rate in the UK, despite a marginal drop last month.

The Office for National Statistics recently released new data showing how the the consumer price index  has dropped one tenth of a percentage point to 3.1 per cent, which is still over a full percentage point above the 2 per cent target set by the government.

In light of such a high CPI, a savings account paying a high interest rate is a necessity to prevent savings erosion.  Most UK savers need a financial instrument that offers a rate of at least 3.88 per cent; those at a higher tax rate need upwards of 5.17 per cent.  Most of the available rates at building societies and banks are significantly below these target numbers.

Research has shown that there are no currently offered variable rate notice savings  or instant access accounts that exceed the inflation rate for an average basic taxpayer, but there are over 85 fixed-rate bonds or accounts that can aid in the quest to tread water financially.  Many of these financial schemes have a higher risk associated with them in order to earn a higher return on their investment.

Many savers are resorting to long-term investment properties, as interest rates are typically higher for extended-year bonds and accounts.  Experts caution savers to committing large sums to exceedingly long terms such as five-year fixed bonds, however, warning that locking in a rate now may result in losing out in the long term if interest rates begin to rise a few years down the line.

High-rate taxpayers, alas, are out of luck, as there are no accounts currently on the market that can counteract both the high inflation rate for those particular consumers.

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