Beleaguered savers are losing out because there are no accounts on the market which give them a real-term return on their money, according to new research.
An article published in London’s Metro newspaper today said the effect of inflation on savings means that £10,000 invested five years ago – allowing for average interest and tax at 20 per cent – would have the spending power of £9,210 today.
There is not a single savings account on the market that taxpayers can choose to negate the effects of tax and inflation, whether it is the consumer price index at 4.8 per cent or the retail price index at 5.2 per cent, the Moneyfacts.co.uk study found.
A saver paying the basic tax rate of 20 per cent would need an account paying interest rates of a ‘staggering’ six per cent, while higher rate taxpayers would require returns of at least eight per cent, the group said.
“With returns so low and inflation unsteady, people don’t know which way to turn.” said spokeswoman Sylvia Waycot.
Richard Gordon of UKPIS said: “This report clearly highlights the current dilemma for savers – where do you put your money? Bank accounts are simply not paying enough interest to counteract the effects of inflation and tax.
“This is one of the reasons people are returning to the property market and in particular buy-to-let. For those with cash, mortgages are more abundant, property prices are affordable, rental demand strong and rental yields high. Now is a great time to be investing in property.”
You can read the full article in The Metro here.