Inflation drop remains good news for savers

Today's announcement by the Bank of England that The Consumer Price Index has fallen for the second month in a row to 2.8 per cent from 3 per cent, now means that more savings accounts beat the eroding effect of inflation. Consumers should take advantage to maximise their returns, according to MoneySupermarket.com.

To beat inflation, basic rate tax payers now need an account paying at least 3.50 per cent to gain benefit in real terms from their savings, increasing to 4.67 per cent for higher rate tax payers, and 5.60 per cent for 50 per cent tax payers.

For basic rate tax payers there are 101 fixed rate bonds and 30 fixed rate cash ISAs that will beat inflation. Higher rate tax payers have less choice with just one fixed rate ISA beating inflation.

Kevin Mountford, head of banking, at MoneySupermarket.com, said: "The fall in inflation for the second month in a row is great news for hard-pressed savers, and this should really offer a boost to those struggling to gain any real returns on their savings pots. The news should also provide encouragement for people to start saving again, especially those whose New Year resolutions to save more may have fallen by the wayside. Six months on and it's not too late to start a savings habit of putting aside money each month to help build up a pot.

"Consumers need to make sure they are on the best deals possible to get the most bang for their buck and avoid paying over the odds for expenses such as energy, household bills and insurance. Reviewing finances and using MoneySupermarket to switch to the best deals can save over £1,000 and free up additional cash to help offset the pressures of the cost of living."