Inflation eats into savings
15th October 2008
Cash ISAs and National Savings & Investments Index-Linked Savings Certificates are the main ways to provide a good rate of return on investment, Moneyfacts has suggested.
Inflation is currently at 5.2 per cent and, as such, a basic rate taxpayer must get a high gross return on their savings in order to keep up with inflation.
However, Moneyfacts estimates that inflation is actually as high as 6.50 per cent and a gross return of 8.67 per cent would be needed by someone on a higher tax bracket.
Commenting on the current economic situation, David Black, principal consultant of banking for Defaqto, said: "Outside of Cash ISAs even basic rate taxpayers now face a struggle to earn a real rate of return on their savings."
Tax-free ISAs can pay interest of up to 7.75 per cent and the company explained that as such they are the best option for savers.
ISAs or Individual Savings accounts were introduced in April 1999.