A new report by Moneyfacts has shown that the recent high levels of inflation have wiped nearly 10% off the real value of people’s savings over the past five years.
Savers, and those people on fixed incomes, for example retirees who have bought a level Annuity, have seen the destructive power of inflation over the past couple of years.
Moneyfacts says that £10,000 saved five years ago would now have the buying power equivalent to £9,208, assuming basic rate tax had been deducted and an average rate of interest received.
Despite the slowdown in the rate of inflation announced yesterday, a basic rate tax payer still needs to tie up their money in a two year fixed rate bond to get an inflation beating interest rate.
For higher rate tax payers there are no accounts which offer an inflation beating interest rate once they have used their Cash ISA (Individual Savings Account) allowance.
After the latest inflation figures at least the situation is getting a little easier. Research from Moneyfacts shows that there are now 159 savings accounts, including Cash ISAs, which provide an inflation beating return; up from just 50 last month.