Double pain as prices rise and rates fall

SAVERS face a double whammy of punishing inflation and paltry savings rates.

Inflation jumped to 3.1 pc in November, its highest level since March 2012.

It means there are no savings accounts that even match the rate of inflation, let alone outpace it.

The rate you can earn on some accounts has risen slightly since Bank of England base rate went up from 0.25 pc to 0.5 pc last month.

But overall, the average savings rate has actually fallen over the past 15 months.

When base rate last stood at 0.5 pc in August last year, the average easyaccess savings rate was 0.55 pc, says data analyst Moneyfacts. Inflation was then running at 0.6 pc.

Today, the average rate is a lower 0.47 pc and inflation is up at 3.1 pc. Rising inflation and low interest rates reduces the spending power of your savings pot.

Even earning the top 1.3 pc in the best easy-access account, its value drops by 1.8 pc a year (3.1 pc minus 1.3 pc) after interest has been added.

This means that over a year, £10,000 will devalue to £9,820.

And if your cash is sitting in the average account, you’ll lose 2.63 pc a year, with £10,000 worth £9,737 after 12 months.