Inflation dropped to 3 per cent in May providing the first bit of good news for savers in ages. It means Britons looking to squirrel away cash now have a whopping choice of 46 saving accounts that pay out more than inflation (well, a year ago there were none, so it’s all relative).
That’s just for non-taxpayers. Basic rate taxpayers need to find an account paying at least 3.75 per cent to benefit from savings in real terms, increasing to five per cent for higher rate taxpayers and six per cent for 50 per cent taxpayers.
Beating inflation has been tough for years. Anyone who put £10,000 in an average savings account five years ago would have the spending power of just £9,208 today, after interest and tax at 20 per cent.
But now anyone paying the lowest rate of tax can have their pick of 31 fixed rate bonds and 15 cash ISAs that pay out more than inflation, according to moneysupermarket.
The most generous of these include Bank Of London and the Middle East’s 4.8 per cent on a five-year fix or 4.5 per cent for three years, and Yorkshire Bank’s 3.9 per cent three-year fixed. On ISAs, Nottingham Building Society is paying 5.02 per cent fixed until next April or BM Savings is paying out 4.25 per cent for a five- year fix.
Higher rate tax payers will still struggle to beat inflation, with just one account offering the chance to do so: the Nottingham Building Society’s ISA. Another way to beat inflation is to open a regular saver account. Account holders at First Direct, for example, should consider its Regular Saver Account. It demands customers save £25-£300 a month for a year, and pays out a generous eight per cent.
Cheshire Building Society’s Platinum Monthly Saver Issue 3 pays out five per cent on deposits of £100-£500 a month. Kevin Mountford, head of banking at Moneysupermarket says: “High inflation combined with low interest rates has made it a tough environment for UK savers who have found it very difficult to gain any real returns on their savings pots. With this dramatic fall in inflation, there is a welcome boost in the number of savings accounts which now beat inflation, and consumers need to make sure they are on the best deals possible to maximise their returns.”