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Savers need to lock up cash for SEVEN years to match inflation

Written by: Paloma Kubiak
Despite coming in at a lower-than expected rate of 2.6%, July’s CPI inflation rate still remains a challenge to savers.

Consumers breathed a sigh of relief as the UK’S CPI inflation figure for July remained steady at 2.6%, unchanged from the previous month, and lower than the peak of 2.9% seen in May.

While the rate confounded expectations of an inflation rise, the figure hasn’t done much to alleviate savers’ concerns as the value of their money is being eroded over time. And coupled with the poor returns on cash, savers have to be savvier than ever to make their money work hard.

Aside from high interest current accounts and linked saver products, one way for savers to match the 2.6% inflation rate is to open a fixed bond and lock up their money for seven years.

Challenger PCF Bank is offering a seven-year bond which pays 2.6%. It’s fairly new to the savings scene, having only received its bank authorisation in December 2016, but financial data site, Moneyfacts, said it has offered some incredibly competitive rates from the outset.

However, finance expert, Rachel Springall, said seven years is a considerable amount of time for someone to invest in cash, but it is an alternative for those who do not want to risk their capital on the stock market.

She said: “Consumers should be mindful that inflation could rise further still and that interest rates on cash savings are unlikely to outpace its effects in the current market. Therefore, savers would be wise to compare all kinds of cash savings vehicles to boost their returns: Fixed rates, regular savers, high interest current accounts but be mindful that they are likely to face funding and access restrictions on some of these options.”

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