Savers under the cosh
A combination of low interest rates and rising inflation has made it exceptionally tough for the UK’s savers.
The low interest rates offered by most bank savings accounts and a hike in the cost of living last month to 3.4 per cent have placed savers under increasing pressure.
On an average account of £10,000, savers could be losing out on as much as £200 once inflation and taxes have been factored in.
Six months ago, higher rate taxpayers who lodged £10,000 in a fixed rate bond delivering 3.95 per cent would have seen a return of £87 annually after tax and inflation had been deducted, Moneynet, the personal financial website, said.
However, a decline to 3.2 per cent on the same account now and a corresponding rise in the cost of living from 1.5 per cent to 3.4 per cent over the same period will turn that profit into a £148 deficit across the next year.
Andrew Hagger of Moneynet said: “With the double whammy of surging inflation and falling interest rates, there’s never been a worse time to be a saver.”
According to Moneyfacts.co.uk, another financial website, higher rate taxpayers require an account delivering 5.64 per cent if they wish to stay ahead of inflationary pressures; for basic rate taxpayers that figure is 4.25 per cent.
By Moneyfacts’ calculations, there are 44 accounts that give basic rate taxpayers the chance to break even on their savings; for higher rate taxpayers that number shrinks to four.
Turn to the average no notice account, and, for basic rate taxpayers, the actual return on their money is -2.82 per cent.
Michelle Slade of Moneyfacts commented: “The rise in inflation is another bitter blow to savers, who were already struggling to achieve a competitive rate of return on their money.”