With inflation dropping, it’s important to find a high-paying account

With inflation dropping to 4.0 per cent last month, savers now have an excellent opportunity to make real returns on their savings accounts for the first time in quite a long time.

There a total of 46 savings accounts that return a rate that beats inflation after taxes, in addition to 15 cash ISAs and 31 fixed rate bonds, industry experts say.  Cash ISAs are a fantastic option because of their tax free nature, as those paying even a basic tax rate need to find an account that pays a bare minimum of 3.75 per cent before taxes, and with higher tax rate payers needing an account that offers a blisteringly high 5.0 per cent rate of return, this is out of reach for the majority.

Still, a 3.0 per cent inflation rate is a boon for the nation’s beleaguered savers, as at the beginning of the year there were only eight ‘inflation-busting’ savings accounts on offer for those who pay basic tax.  This left all too many savers out in the cold when it came to protecting their money from the erosive effects of inflation on their savings balances.

For anyone who has yet to lock in their 2012-2013 tax year cash ISA allowance, which stands at £5,640, this could be a major windfall – especially since some economists predict inflation to fall even further as time goes by this year.  One excellent choice is Santander’s two year ISA, which boasts a 4 per cent rate of return across the entire term, and requires just a single pound to take out.

Meanwhile, for savers looking for a much longer term deal, Halifax’s 4 year ISA has an 0.15 percentage point lead on Santander, but with such a long term, experts say that the 4.15 per cent return isn’t much of an advantage in the long run.

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