Millions of British savers will find the value of their investments wiped out by the increase in the cost of living, financial experts said after a surprise jump in inflation to 5.3 per cent means that not a single savings account on the market offers an interest rate higher than the cost of living.
None of the 1,660 savings accounts offered by banks or building societies, including the most generous ISAs, offers a real rate of return of more than 5.3 per cent. This is the first time ever that no account has been able to match the rising cost of living, says personal finance website Moneynet.
The Retail Prices Index jumped from 4.4 per cent in March to 5.3 per cent in April. It is widely accepted as the truest measure of the cost of living because it includes housing costs. This is the highest level it has been since 1991.
Record prices at the petrol pumps, higher mobile phone and telephone bills, an increase in food and drink prices as well as rising mortgage rates and the cost of clothing are partly to blame. Also fuelling the increase were tax rises announced in Alistair Darling's last budget, which pushed up the price of alcohol and vehicle duty. The restoration of VAT to 17.5 % also increased prices on nearly all items on the high street.
Wage increases, which average just 1.9 per cent higher than a year ago, mean most workers are suffering from a significant fall in their standard of living.
Inflation damages savings, because even though the investment can increase in value, it cannot keep pace with the increase in prices on the high street.
Inflation creeps up on you. You think you are getting more money every year, through wage increases or interest earned on your savings, but when you go out and try to spend you money you realise you can't afford what you used to be able to. The bottom line is,
you end up poorer.
Interest earned by a savings account is taxed, so a bank account now needs to offer interest of at least 6.63 per cent for basic rate taxpayers and 8.83 per cent for higher rate taxpayers to make any real return.
There is not a single saving account in the country that offers more than 8 % and just one, from HSBC, that offers more than 6.63 %, but that account has a fee of £15 a month and you must make regular monthly deposits.
If VAT goes up to 20 per cent savers will be hit even harder.
According to the Bank of England the average savings account pays out a mere 0.18 per cent, while the average cash ISA is paying 0.46 per cent.
Most economists are hopeful that inflation has peaked and will start to fall over the next few months and that the Bank of England will not raise interest rates until next year.
Jonathan Loynes, chief economist at Capital Economist, said: "We continue to expect interest rates to stay where they are for a long time." Well ain't that just fine & dandy! Your all getting poorer whilst asleep in your beds. Who shall we blame for this one then? Who has had his chewed fingers on our finances for the past 13 years? Why none other than Gordoom McFuckwit Broon. His failure to act in time & to apply the correct measures means we are still in the recessionary shite.
Info from The daily Telegraph
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