Savers hit by double blow as prices soar

SAVERS face a double whammy of the cost of living climbing at 3pc a year and the Bank of England base rate languishing at 0.25 pc.

Experts say it is hard to imagine the situation being any worse.

Inflation jumped to 3pc in September, its highest since April 2012. The rate you can earn on savings has edged up slightly, but by far less than the rise in the cost of living.

At the start of this year, the top oneyear fixedrate bond paid 1.4 pc. Now, it’s 1.8pc from Atom Bank, a rise of just 0.4 percentage points. But inflation has jumped by 1.2 percentage points, from 1.8 pc to 3 pc.

The best easyaccess deal has risen just 0.2 points, from 1.1pc to 1.3pc with RCI Bank’s Freedom Savings.

Inflation and low interest rates reduce the spending power of your pot. Even earning the top 1.3pc, its value drops by 1.7pc a year (3pc minus 1.3 pc) after interest has been paid. So each £10,000 devalues to £9,830 over a year. If you are in a poorpaying account that matches the 0.25pc base rate, your £10,000 will be worth a mere £9,725.

Patrick Connolly, financial planner at Chase de Vere, says: ‘Stick to easyaccess accounts for the next month or so, rather than tying up your money in fixedrate bonds.

‘The Bank of England may raise the base rate next month, and there could be better rates around then.’