moneysupermarket.com: RPI rate falling to -0.4%

Commenting on RPI rate falling to -0.4 per cent, Kevin Mountford, head of banking at moneysupermarket.com says: "The level of savings - or savings ratio - has been too low for too long in the UK. However, deflation might be the trigger savers need to get them back in the savings habit because their money will be worth more.

"The Government will also be hoping this increased purchasing power will encourage consumers to continue spending in an effort to kick start the economy. However, debtors should use any spare cash to get out of the red now as deflation means the ‘value' of debts actually increases.

"Many pensioners will also be worse off. RPI has turned negative but this measure of inflation includes mortgage payments, which have fallen recently because of interest rate cuts. Most of those in retirement don't have mortgages so they won't have benefited from this. Instead, they are seeing their income fall because savings rates have been slashed and they have pensions linked to inflation - yet the cost of many things they buy is still going up. CPI, the other measure of inflation, fell last month but it remains in positive territory at 2.9 per cent."