Battle to beat dreaded inflation

CASH savers are caught between a rock and a hard place as they seek to protect their money from the corrosive impact of inflation.

Analysis by data scrutineer Savings Champion shows that only 217 accounts open to new savers now pay interest in excess of 0.6 per cent – the current inflation rate. Of these, most are fixed-rate bonds and require investors to tie up their money for a set period.

Although attractive now compared to what else is available, these fixed-rate bonds would soon lose their lustre if inflation were to go even higher – as many economists predict – or if interest rates were to increase. Most savers would either be trapped or be required to pay a hefty penalty to move their money elsewhere.

‘It’s a tough savings market out there,’ says Anna Bowes, cofounder of Savings Champion. She recommends savers adopt a pragmatic approach, splitting cash savings across both fixedrate and variable-rate accounts.