Sole saving account beats inflation
The number of inflation-beating savings accounts on the market has shrunk from 227 a year ago to just one today, according to a financial website.
Moneyfacts found that of the 804 accounts on the market, including Isas, the only one to beat inflation and basic rate tax is a fixed-rate seven-year bond from Skipton Building Society, paying 3.5%.
The eroding effect of inflation on savings means that £10,000 invested five years ago has the spending power of just £8,842 today, when taking average interest and basic rate tax into account.
Moneyfacts.co.uk spokeswoman Rachel Springall said the choice of savings accounts available generally has fallen by around one-quarter over the last year as the “damaging” fallout from a Government scheme called Funding for Lending continues.
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The scheme has given lenders access to cheap finance in order to help borrowers. This has given the mortgage market in particular a boost, but has made providers less reliant on having to offer attractive savings accounts to pull in savers’ money.
There was further bad news for hard-pressed savers last week, when the Bank of England indicated that historic low interest rates are here to stay for the next few years.
Campaigners have argued that continued low interest rates are causing harm to any economic recovery by damaging their ability to spend on the high street.
Ms Springall said that a year ago there were 227 accounts, including 128 tax-free Isas, which would have given savers real returns on their money.
This time last year, a saver could have been paid a rate of 3.5% on a bond which would have locked their money away for just two years, rather than the seven-year deal being offered by the Skipton.
Ms Springall said: “These are dark days for savers as there is only one standard savings account to beat basic rate tax and inflation, a seven-year bond which is a long commitment.
“Savers would be wise to be wary of locking their money away for the long term. The market remains volatile so opting for an easy access account to move money more freely is a safer option.”