Savers are starting to see a real rate of return at last as prices go into retreat
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Your support makes all the difference.The fall in inflation below 4 per cent yesterday was hailed as long-awaited good news for savers, meaning there are now seven standard savings accounts paying out a real rate of return.
That may not sound a lot, but it is up from zero last month. Basic-rate taxpayers need to find accounts paying interest of 4.5 per cent per year to beat the erosional effect of rising prices.
There are now seven savings bonds — from BM Savings, the AA, Vanquish Bank, State Bank of India, Saga, Leeds building society and Clydesdale Bank — which do so, according to Moneyfacts.
However, no instant-access or cash ISAs currently offer a rate which beats inflation, and the average no-notice savings account still only pays out 0.92 per cent.
For higher-rate taxpayers there are still no deals on the market paying the 5.99 per cent they would need to beat inflation, apart from tax-free ISAs.
The watering-down effect of inflation on savings means that £10,000 invested five years ago, accruing average interest and paying tax at 20 per cent, would have the spending power of just £9,190 today.
Sylvia Waycot, of Moneyfacts, said: "The expected fall in inflation heralds a change in fortunes for savers as more savings accounts finally offer a rate of return that beats inflation, something savers have long been desperate for.
"However, [seven accounts] are a small blessing when compared to the total number of standard savings accounts available, which is 1,100."
Kevin Mountford, head of banking at comparison site Moneysupermarket, added: "The continuing fall in inflation should really help encourage people to start saving again."
A survey by the site found that a fifth of savers planned to start squirreling money away again when inflation fell.
Mr Mountford added: "High inflation combined with low interest rates has particularly impacted on UK savers.
"Consumers need to make sure they are on the best deals possible to maximise the returns. The top-paying savings accounts currently offer rates over six times that of base rate so, by choosing these, you can reduce the impact inflation has on your pot."
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