A recent research study has found that savings accounts in the UK are failing to protect savers against the ravages of inflation, industry experts report.
The Consumer Prices Index, a measure of the nation’s inflation rate, declined slightly last month, from its former figure of 5.0 per cent down to 4.8 per cent. Even with the slight relief, savers need to find a personal or business bank account provider hat offers a savings product of 6.00 per cent at minimum in order to halt the effects of inflation on their hard-earned cash.
Higher rate taxpayers are even worse off, as those paying 40 per cent in taxes need to find a high interest savings account of 8 per cent or more in order to protect from erosion caused by inflation. Meanwhile, the average instant access saver on offer in the UK have interest rates of only 0.93 per cent – a far cry from what savers actually need to protect their investments.
One savings and investments expert commented on the new research findings, remarking that the number of savings accounts that were safe for those paying the basic tax rate have dwindled to none over the past year. 2010 figures indicated that there were 57 savings products that actually provided real returns to savers, yet now Brits are wondering why they should bother putting cash aside for the future if it’s worth less a year following their initial deposit, the expert also said.
Many savers may think that turning to bonds may be a viable alternative. However, while these products do offer better savings rates than instant access savers, not only are interest rates too low to counteract inflation, savers need to kiss their money good bye for 12 months at a time – or even longer in some cases.