Defaqto: Inflation affecting savings

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Defaqto: Inflation affecting savings

Thu 17th Jul 2008

Higher rate taxpayers can no longer get "a real rate of return" from instant, easy access or notice accounts due to inflation, Defaqto has found.

The financial services researcher said that the latest Retail Price Index, which reveals inflation at 4.6 per cent, means higher rate taxpayers need a gross return of 7.67 per cent simply to keep up.

Basic rate taxpayers need 5.75 per cent.

Higher rate taxpayers also cannot expect proper return rates from fixed rate bonds.

Only 12 accounts, excluding cash ISAs and the NS&I Index Linked Savings Certificates, would give real rates of return to higher rate taxpayers.

Seven of them, regular savings accounts, are from Alliance & Leicester, Abbey, Halifax, HSBC, Chorley & District BS, Norwich & Peterborough BS and Barclays.

The five others, which are current accounts, are with Alliance & Leicester, Abbey and HSBC.

Meat prices, especially beef, was one key factor in rising inflation according to the Office of National Statistics' data, the BBC reported.

Prices of fruit, cereal and bread also rose, while motorists suffered a petrol price increase of 5.3p a litre between May and June.

There were also increases in foreign holidays and DVDs.

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