Now savings accounts will LOSE you cash as inf lation jumps to 1%

MILLIONS of Britons are now losing money on their savings after the cost of living soared last month.

In a major blow for households, only a minority of savings accounts now pay rates above inflation, it has emerged.

It means many savers are effectively getting poorer as the interest on their savings fails to keep up with the cost of goods and services.

Inflation reached a two-year high of 1 per cent last month, compared with 0.6 per cent in August, official figures revealed yesterday.

But research shows over half of savings accounts offer below this figure – meaning many nest eggs are shrinking in real terms. Most deals which beat inflation force savers to lock up their money for at least a year.

‘Change has got to come’

As a result, families who need quick access to cash must put up with below-inflation rates and watch their savings dwindle.

According to the Moneyfacts website, 378 out of 644 savings accounts now pay less than inflation. Of the 266 which match or beat 1 per cent inflation, 157 require savers to put their money aside for at least a year and 18 others force savers to give a month’s notice before they can access their cash.

Rachel Springall, of Moneyfacts, said: ‘The situation for savers is getting pretty desperate and it is set to get worse with inflation likely to keep rising. Millions will now find themselves on a rate below inflation, which is effectively eroding their savings.

‘Such poor returns will particularly affect those who rely on their savings day to day such as retired people, and could discourage people from saving in the first place.’

Richard Wazacz, of peer-to-peer lender Octopus Choice, said: ‘It is scary and shocking so many people holding money in socalled low-risk savings accounts are, in real terms, getting poorer. Rising inflation and low interest rates have created a strange scenario where many bank accounts are not even retaining customer’s wealth, let alone growing it. This is particularly affecting the elderly who often look to savings accounts to protect their wealth, not erode it.’

Theresa May hinted last month she may offer a lifeline to longsuffering savers. She criticised the Bank of England for printing money, known as quantitative easing, by saying it had created ‘bad side effects’. Mrs May said, while the policy had been necessary during the economic crisis, it had damaged the savings of the young and elderly, adding: ‘A change has got to come.’

Her words sparked speculation that Chancellor Philip Hammond could offer help to savers in the Autumn Statement next month.

Susan Hannums, of the independent savings advisers, Savingschampion, said: ‘It is clear that savers now need all the help they can get.’