Cash ISAs provide 'real rate on return'
17th July 2008
Cash ISAs and National Savings & Investments Index-Linked Savings Certificates are the only accounts worth paying into for those higher rate taxpayers who are struggling to beat inflation.
That is the warning from independent financial research company, Defaqto Ltd, who has said that with inflation running at 4.6 per cent savers need to make their money work harder.
David Black, principal consultant of banking for Defaqto, said: "There are currently only twelve accounts - excluding Cash ISAs and the NS&I Index Linked Savings Certificates - that will provide a real rate of return to an adult higher rate taxpayer."
He continued: "This really demonstrates the advantage gained by using your annual Cash ISA allowance. Some individuals may now have balances of almost £50,000 in Cash ISAs."
Defaqto estimated that higher rate taxpayers need to get a gross return of 7.67 per cent simply to keep up with inflation whilst those that pay basic rate tax need to be getting 5.75 per cent.
According to Kevin Mountford, head of savings at moneysupermarket.com, "savings institutions are already reporting higher demand for cash ISAs".