October 28 2016 Latest news:
Ed Foss, Senior writer
Tuesday, May 17, 2011
The consumer prices index, the official measure of inflation, rose this month to 4.5pc, more than double the target.
The April figure was well up from the previous month of 4pc and leaves savers and shoppers under increased pressure.
Andrew Hagger of Moneynet said the position for savers was that a basic rate tax payer would need a gross savings rate of 5.625pc and a high rate tax payer 7.5pc to maintain spending power of their savings
“The gloom for savers shows no sign of clearing and it’s likely to be sometime before the inflation returns to anywhere near the now meaningless 2pc government target.
“The NS&I Index Linked Savings Certificates launched last week look a very good option in the current market and today’s inflation numbers will only increase the demand for these products.
“Unless banks and building societies ramp up their savings rates they could find huge swathes of their retail savings balances heading out of the door in favour of the new NS&I Index Linked offering.”
Research from Moneyfacts.co.uk revealed that the effect of inflation on savings meant that £10,000 invested five years ago, allowing for average interest, inflation and tax at 20pc, would have the spending power of just £9,481 today.
Sylvia Waycot, spokesman at Moneyfacts, said: “After one month’s reprieve inflation is back on the rise, scuppering hopes of getting any meaningful return on family savings for another month.
“Every time it rises, spending power decreases and any hard earned nest egg or savings safety net is further eroded.
“The only certainty for anyone trying to supplement their income with savings interest is that it will result in disappointment.”
And Kevin Mountford, head of banking at Moneysupermarket.com said: “Consumers are not only battling rising day-to-day costs and a reduced level of disposable income, many are also having to deal with pay freezes, which means in real terms, their incomes are being reduced.
“Many families will feel like their finances are approaching breaking point.”