JUST one in 100 savings accounts provide a real rate of return to basic rate taxpayers, it was revealed yesterday.
With consumer price inflation jumping to 4.5 per cent, the number of accounts providing a real return plummeted further, financial research group Defaqto calculated.
“With high inflation on one hand and a prolonged low-base rate on the other, the current economic environment is really impacting on savers,” said Defaqto’s David Black.
A basic rate taxpayer at 20 per cent needs a savings account paying 5.63 per cent per annum in order to achieve a return. A higher rate payer at 40 per cent needs at least 7.5 per cent.
Only 0.7 per cent of savings accounts would be sufficient for a higher rate taxpayer. “The effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest, inflation and tax at 20 per cent, would have the spending power of just £9,481 today,” announced the Moneyfacts website, which conducted separate research.