Money News

Don’t let inflation shrink your savings

Friday, 20 November 2009 Writes Hazel Cottrell hazel.cottrell@consumerchoices.co.uk

Savings returns are being wiped out by inflation, as experts urge savers to protect themselves by switching to a better deal.

It’s more challenging than ever for savers to secure a decent return, as monthly inflation jumped to 1.5% in October.

If rates go any lower then savers will find it almost impossible to beat inflation.

Savers must now secure an interest rate of 1.875% to ensure their savings are not eaten away by inflation. And if they are higher-rate taxpayer, they’ll need a rate of 2.5% to gain benefit from their savings in real terms.

This is no easy task, as less than a quarter of savings accounts pay at least 1.875%, according to moneysupermarket.com.

Kevin Mountford, head of banking at moneysupermarket.com, said: “We expected to see savings rates creep down before the end of the year, but if rates go any lower then savers will find it almost impossible to beat inflation.”

Chris Eagle, commercial manager at Creditchoices.co.uk, said: “Analysts have predicted that inflation could hit 3% in the coming months, so it’s essential that savers keep a keen eye on their savings rate, compare savings accounts and switch if a better deal is available.

“If you are looking for a higher rate, it’s definitely worth checking out Barclays’ (www.barclays.com) latest savings deals, which include a two-year fixed-rate account paying 3.5% and a monthly savings account paying 4.25%.”

More information on Barclays savings accounts