Inflation remains high but savers can still make money work harder

Today's announcement by The Bank of England that The Consumer Price Index (CPI) has remained at 2.7 per cent, means that savers need to be proactive and move to an account paying better rates in order to limit the impact of inflation on their money, according to analysis by MoneySupermarket.

To beat inflation, basic rate tax payers will need an account paying at least 3.39 per cent to gain benefit in real terms from their savings, increasing to 4.51 per cent for higher rate tax payers, and 5.41 per cent for 50 per cent tax payers.

No easy access accounts currently beat the effects of inflation while 13 easy access ISAs and one fixed rate ISA that beat inflation. However, with the current average savings rate currently at 0.26 per cent, the majority of savers can still switch to much better deals and reduce the impact of inflation.

Kevin Mountford, head of banking, at MoneySupermarket, said: "The high cost of living has had a major impact on UK household budgets, and today's news that inflation remains at 2.7 per cent, will be unwelcome news for savers, especially in light of the low number of savings options available that beat inflation.

"It is important savers don't give up though, or get put off, and prepare to switch if they are not currently on the most competitive deal. With the majority of savings sitting in accounts paying a derisory rate of interest, most savers will still benefit from switching to market leading deals, even if the rates on offer don't beat the eroding effect of inflation. Limiting the impact of inflation is vitally important at a time when you will struggle to find accounts that beat it, especially if you cannot lock money away for the longer term or have already utilised your tax free allowance. It is also important to check your rate if you signed up to an account offering a bonus rate, as there are many deals coming to an end shortly, meaning you could be left on a very uncompetitive rate.

"As we approach the end of the current tax year savers should utilise products such as Cash ISAs to take advantage of the tax free benefits they offer. Savers should also consider looking at alternative products such as offsetting savings against mortgage borrowing or peer-to-peer lending as the returns may be more favourable."