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| Savers face limited options despite fall in inflation rate | Savers face limited options despite fall in inflation rate |
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| Taxpaying savers who want to earn an interest rate that beats inflation still face a limited choice of accounts, despite a slowdown in the rising cost of living. Figures out this week showed that the consumer prices index dropped from 2.8% to 2.4% in April, offering some relief to cash-strapped households. However, anyone with savings will still see the value of their money eroded, unless they opt for a fixed-rate, fixed-term account or an Isa – and even then, the choice is limited. | Taxpaying savers who want to earn an interest rate that beats inflation still face a limited choice of accounts, despite a slowdown in the rising cost of living. Figures out this week showed that the consumer prices index dropped from 2.8% to 2.4% in April, offering some relief to cash-strapped households. However, anyone with savings will still see the value of their money eroded, unless they opt for a fixed-rate, fixed-term account or an Isa – and even then, the choice is limited. |
| To outstrip inflation, a basic-rate taxpayer needs to earn a rate of 3% in a standard savings account, while a higher-rate taxpayer needs to find a rate of 3.99%. However, financial information firm Moneyfacts said that of 861 non-Isa accounts on the market, only Virgin Money's five-year fixed-rate bond paid as much as 3%. Even in the Isa market, where tax is not paid on interest, savers' choice is restricted. Again, Virgin Money is offering 3% for five years, followed by Principality building society's five-year bond at 2.75%, and Coventry building society's two-year fix at 2.55%. The Isas can all be closed before their end date, subject to the loss of some interest. | To outstrip inflation, a basic-rate taxpayer needs to earn a rate of 3% in a standard savings account, while a higher-rate taxpayer needs to find a rate of 3.99%. However, financial information firm Moneyfacts said that of 861 non-Isa accounts on the market, only Virgin Money's five-year fixed-rate bond paid as much as 3%. Even in the Isa market, where tax is not paid on interest, savers' choice is restricted. Again, Virgin Money is offering 3% for five years, followed by Principality building society's five-year bond at 2.75%, and Coventry building society's two-year fix at 2.55%. The Isas can all be closed before their end date, subject to the loss of some interest. |
| Sue Hannums of website savingschampions.co.uk said that in total 14 Isas beat inflation, but around half have restrictions of some kind. First Direct is offering a rate of 2.96%, but only to people with another account at the bank and on holdings of £40,000 and upwards. Nationwide's Flexclusive Isa pays 2.5%, but you need to have a current account to apply, and fund it with £750 a month. | Sue Hannums of website savingschampions.co.uk said that in total 14 Isas beat inflation, but around half have restrictions of some kind. First Direct is offering a rate of 2.96%, but only to people with another account at the bank and on holdings of £40,000 and upwards. Nationwide's Flexclusive Isa pays 2.5%, but you need to have a current account to apply, and fund it with £750 a month. |
| Hannums said she feared inflation would rise later in the year and make life even more difficult for savers. "Even if you choose a rate that is positive now, it might not be beating inflation in a few months," she said. "Savers need to keep on top of things and move around if necessary." | Hannums said she feared inflation would rise later in the year and make life even more difficult for savers. "Even if you choose a rate that is positive now, it might not be beating inflation in a few months," she said. "Savers need to keep on top of things and move around if necessary." |
| Sylvia Waycot from Moneyfacts.co.uk said money held in savings accounts was being "savaged by stagnant returns". She said that even though Isa rates were poor, savers should still use their £5,760 cash Isa allowance. "You can't claim the allowance back when rates are higher so you should use it now – that way you can move it to a better rate later." | Sylvia Waycot from Moneyfacts.co.uk said money held in savings accounts was being "savaged by stagnant returns". She said that even though Isa rates were poor, savers should still use their £5,760 cash Isa allowance. "You can't claim the allowance back when rates are higher so you should use it now – that way you can move it to a better rate later." |
| Top savings accounts | Top savings accounts |
| Britannia | |
| Yorkshire BS | Yorkshire BS |
| Teachers BS | Teachers BS |
| Powered by MoneySupermarket for the Guardian | Powered by MoneySupermarket for the Guardian |