High inflation eroding savings

High inflation levels mean that savers have to find accounts with high interest rates if they want to prevent their nest eggs from being eroded.

Figures from the Office for National Statistics put inflation at 3.2% in September, up 0.1% compared to August.

According to Moneyfacts.co.uk, this means that basic-rate taxpayers need a savings account paying 4% interest, while high-rate taxpayers need an account offering 5.33% to beat inflation.

To access these rates, savers may have to lock their cash away for several years, with long-term fixed-rate bonds being the most likely to offer rates over 4%.

Just 31 savings accounts currently on offer negate the impact of inflation for basic-rate taxpayers, with only two available to higher-rate payers.

"It is difficult for savers, at best they should try to stay within an arms length of inflation and try to weather the storm of low rates and high inflation," commented Darren Cook of Moneyfacts.co.uk.

"The average instant access savings rate is still at rock bottom at a rate of only 0.79%."

Jason Riddle, co-founder of action group Save Our Savers, recently urged people not to put off saving due to low interest rates.

Posted by Ruth Bradshaw