Only cash Isa deals beat inflation other savings accounts lag way behind

11

View comments

The cost of living has risen by 2.8 per cent over the last 12 months, government figures revealed yesterday.

While inflation as measured by the consumer prices index remains stubbornly high, savings rates have fallen sharply over the past few months.

In July last year, savers could tie their money up for a year at 3.6 per cent before tax. Now the best they can do is 2.25 per cent.

Lock it away: Halifax and Principality both pay 3.1¿per cent fixed for five years

To match inflation — and retain the spending power on their savings —basic-rate taxpayers need to earn 3.5 per cent before tax.

Not one single taxable account or fixed-rate bond pays this rate.

The best you can do in an easy-access account is 2 per cent from Skipton BS. At this rate, basic-rate taxpayers are missing out to the tune of 1.2 per cent a year (that’s inflation at 2.8 per cent less interest of 1.6 per cent) turning the spending power of each £100 into £98.80.

  More... ASK TONY: I'm anxious about my stocks and shares Isa - is there a real risk of monetary loss? How savers are gaining thousands extra simply by depositing early How to start saving, beat the taxman and track down the best rates Best savings rates: General savings - Internet and branch Building a nest egg? Find the best savings account

Higher-rate taxpayers are hit even harder — they need to earn 4.67 per cent merely to keep up with inflation.

The top one-year bonds at 2.25 per cent come from Aldermore and Shawbrook banks. Halifax and Santander pay a lousy 1.75 per cent.

Kent Reliance pays a top (2.46 per cent for two years and Shawbrook 2.5 per cent for three years.

Even on tax-free cash Isas, savers have few options if they want to match inflation.

Halifax pays 3 per cent to those willing to tie their money up for three years while both Principality and Halifax pay 3.1 per cent fixed for five years.