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Savers still battling effects of inflation

The rising cost of living means that most savers are finding it a struggle to outpace the effects of inflation.

With the consumer prices index at 4.4 per cent in July, a basic-rate taxpayer would need a savings account that pays a minimum of 5.5 per cent in order to get a return on their money.

For higher-rate taxpayers, that figure climbs to 7.33 per cent.

A year ago there were over 90 accounts that enabled savers to beat inflation. Now there are just eight, all of which are fixed-rate cash ISAs.

Michelle Slade, of Moneyfacts.co.uk, the financial website, said: "Anything less means the spending power of savers' capital is being eroded. Already £266 has been wiped off the spending power of £10,000 in just five years.

"Those worse affected will be savers who rely on the interest from their savings to supplement their income, many of whom are pensioners. While savers may not be able to negate the effects of inflation, they should try to limit its effects by searching out the most competitive rates."