Not a Sausage in Savings Interest!

24th February 2015

Inflation figures released today show that the Consumer Prices Index (CPI) fell from 0.5% to 0.3% during January.

To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 0.38% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 0.50%.

Of the 629 non-ISA accounts in the market today, there are 371 that basic rate taxpayers can choose to negate the effects of tax and inflation.

ISAs, however, present a slightly better picture with 187 out of 213 offering rates that beat inflation.

The effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20%, would have the spending power of just £8,769 today - a fall of 12.31%.

Sylvia Waycot, Editor at Moneyfacts.co.uk, said:"It's official, after tax and inflation, the average interest paid on easy access savings accounts, which is currently 0.66%, isn't even enough to buy you one sausage a week*.

“Any saver who deposited £10,000 in an average account five years ago will find that while they still physically have £10,000, it is worth much less today. Over 60 months the loss equates to around £20 per month, leaving you with £1,200 less bang for your buck!

“There are a total of 558 savings accounts (218 fixed bonds, 55 notice, 98 no notice and 187 ISAs) to choose from that pay enough interest to negate the effects of tax and inflation*.

“The average interest paid across the ISA range is still miserable at 1.44%, even less than last year when it was 1.65%.

“Inflation has hit a new low, and although this helps today's savings interest go further, it still won't get you a sausage."