How falling inflation can help boost savings
The Bank of England’s announcement that The Consumer Price Index (CPI) has fallen to the lowest levels in almost three years, falling to 2.2% from 2.5%, last month will be welcomed by savers.
According to MoneySupermarket.com, now is the perfect opportunity for savers to check existing rates and to switch to a better deal to maximise returns on any savings.
Kevin Mountford, head of banking at MoneySupermarket.com, said: “Today’s news that inflation has fallen to a three year low should serve as a reminder to savers that they should be checking their rates and preparing to switch if they are not currently on the most competitive deal.
“There can be a significant difference between the average and top paying rates so moving to a better deal can go a long way to help savers limit the impact on their pots.”
In order to beat inflation, basic rate tax payers will need an account paying at least 2.76% to gain benefit in real terms from their savings, increasing to 3.68% for higher rate tax payers, and 4.41% for 50% tax payers.
MoneySupermarket says that there are now four easy access accounts for basic rate tax payers, 16 cash ISAs, 144 fixed rate bonds, 61 fixed rate ISAs and 19 notice accounts that beat the eroding effect of inflation.
For higher rate tax payers there are still no easy access accounts that beat inflation. However, there is 12 fixed rate bonds and 3 fixed rate ISAs beat inflation.
Mountford added: “In addition, falling inflation also helps ease the pressure on UK household finances, although the recent energy price rise announcements may mean this reduction may only be a temporary fall.
“This month’s figures will also impact how much benefits such as Jobseeker’s Allowance are increased by next April. Households should still look to review all of their household bills and finances and try to reduce their outgoings, as the cost of living it still high.”