No savings rates can beat 3.2pc inflation

SAV erS continue to face a double whammy of low interest rates and a rise in the cost of living — and it’s getting worse. the gap between inflation and savings rates has widened.

inflation is running at 3.2 pc as measured by the retail prices index, slightly down on last month’s 3.3 pc.

But the amount savers earn on fixedrate bonds taken out now has tumbled by much more.

Last month, savers willing to tie their money up for a year could earn 2.4 pc after tax (3 pc before). Now the best they can do is 1.92 pc (2.4 pc).

At today’s 3.2 pc inflation rate, basicrate taxpayers need to earn an unattainable 4 pc before tax just to maintain the spending power of their money.

But pitiful interest rates mean they miss out on at least 2 pc a year, cutting the spending power of each £100 to £98 over 12 months. Higher-rate taxpayers need to earn 5.33 pc before tax simply to match inflation.

even non-taxpayers lose out with the rise in the cost of living higher than best before-tax rates on fixed-rate bonds.

top fixed-rate deals from the Co-op Bank and Britannia vanished last week. they were on offer for just over three weeks. Sainsbury’s Bank, Saga and Cahoot two-year deals have also gone.

Others have cut their rates to new savers. Santander pays 1.4 pc (1.75 pc) fixed for one year now, down from 1.6 pc (2 pc). the best one-year deal comes from tesco Bank and Saffron BS at 1.6 pc after tax (2 pc before). For two years, Halifax pays 1.84 pc (2.3 pc) or 1.92 pc (2.4 pc) for three years.