Savers ‘ignored for too long’
Savers are still suffering despite inflation easing back, a financial information website has warned.
Just seven accounts out of a total of 861 on the market offer rates that keep up with or beat the 2.4% rate of inflation, of which six are tax-free cash Isas, according to Moneyfacts.co.uk.
This time a year ago, savers had more than 150 accounts to choose from which could offset the impact of tax and inflation.
The eroding effect of inflation means that £10,000 invested five years ago would have the spending power of £8,860 today, when average interest rates and tax are taken into account.
In terms of cash Isas, a deal from Virgin Money is at the top of Moneyfacts’ tables. It pays a five-year fixed rate of 3%. Skipton Building Society, Principality Building Society, United Trust Bank and Julian Hodge Bank also have Isa deals which match or beat inflation.
The only non-Isa account that offsets inflation is another deal from Virgin Money, which is offering a five-year fixed-rate bond at 3%.
Experts have blamed recent Government efforts to help borrowers for making the situation worse for savers, who were already struggling in the low interest rate environment.
The Funding for Lending scheme, launched last August, gives lenders access to cheap finance and has made them less reliant on attracting savers’ deposits.
This year’s Isa season, when providers traditionally ramp up competition to pull in savers as the new tax year approaches, was said to be particularly lacklustre.
Sylvia Waycot, editor at Moneyfacts.co.uk, said: “It is absolutely shocking that only six Isas beat or match the rate of inflation. Savers need to get angry. They have been ignored for too long.
“Taking into account the taxman’s share and the cost of living, savers need an account paying a hefty 3% before they earn a real rate of return and yet the average no notice savings account only pays a paltry 0.72%.
“In contrast, a year ago, there were 127 Isas and 32 standard accounts that beat tax and inflation despite the Bank of England base rate being static at 0.5% and CPI (consumer prices index) standing at 3%.”
Ms Waycot advised hard-pressed savers to make the most of their money by making sure they use up all of this year’s £5,760 cash Isa allowance so at least they do not have to share their returns with the taxman.
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