Inflation rose again in April, hitting a 17 month high, leaving savers with money wiped off the value of their savings.
Measured using the Consumer Prices Index, inflation hit 3.7% in April, but when housing costs are added in for the Retail Prices Index, inflation reached 5.5%.
As moneysupermarket.com analysis shows, since December 2009, a higher rate tax payer with a savings pot of £30,000 will have seen the value of these savings depreciate by £206. Standard tax payers will have lost £121 in the same period.
Anyone looking to save money needs to be aware of the impact inflation has on their savings.
To counter inflation, basic rate tax payers need a savings account paying 4.63% to benefit in real terms from their savings. This rises to a staggering 6.17% for higer rate tax payers and 7.41% for those in the new 50% tax band.
As Kevin Moutford, head of banking at moneysupermarket.com, comments “It’s getting harder to earn a positive return on your savings, but rather than sitting back and doing nothing, it is more important than ever for savers to proactively seek the best returns possible on their money.
Given the low number of products which offer a return above inflation, savers really need to keep a close eye on the interest rate, especially on fixed-term accounts whose rate may come crashing down after the term ends. There are things you can do to maximise the return on your savings. For example, it’s a no-brainer to utilise your tax free ISA allowance which increased last month to £5,100 for cash savings, and consumers need to be aware of any withdrawal penalties attached to their account.”