Savers turn to ISAs as inflation drop stalls, reverses

With the drop in the nation’s inflation rate not only stalling but actually reversing  last month, savers looking to maximise their returns are turning to tax-free ISA products, experts say.

The Office of National Statistics found that the Consumer Price index actually rose by 0.1 per cent last month to 3.5 per cent.  The price of food was found to be behind the rise, as it fell between February and March 2011 due to heavy discounts being implemented by supermarkets – while the same occurred this year, the discounts were not as deep, equating to an increase vis-a-vis last year’s figures.

While produce and meat prices were particularly responsible for the stall in the inflation rate’s decline, furniture, footwear, and clothing retailers have all been raising their prices as well, which drove the CPI upward by one tenth of a percentage point.  Once again, the Chancellor will have to justify why the 2 per cent inflation target set by the Bank of England remains so far out of reach, and why those with savings accounts are being hung out to dry by both high inflation and low overall interest rates.

Savers cannot rely upon standard savings products to make their money work for them, as anyone paying the basic tax rate would need to find an account that paid 4.4 per cent or more in order to ameliorate the erosive effects of high inflation on their cash.  As it’s nearly impossible to find such a deal on the open market, savers have instead turned to tax-free cash ISAs, as there are several deals that offer at least 3.5 per cent rates of return.

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