Basic and high-rate taxpayers 'will struggle'

Tuesday, February 16th 2010

Basic and higher rate taxpayers may be struggling with their savings, according to reports out today (February 16th).

Annual inflation figures for the Retail Prices Index and the Consumer Prices Index have been revealed at 3.7 per cent for the former and 3.5 per cent among the latter.

This means that a real rate of return on taxable savings accounts is almost impossible for those who pay basic and higher rate taxes.

Banking specialist at Defaqto David Black explained that the average interest on instant access accounts is "paltry".

"Savers have to be incredibly proactive to get the best deals," he advised.

Certain cash Isas offer better returns but there are few current and regular savings accounts that can promise such rates.

People who supplement their income with interest on their savings "will be devastated by this double whammy of rising inflation and low interest rates", Mr Black added.

Chief European economist at Capital Economics Jonathan Loynes last week agreed that the high inflation rate is a "short-term anomaly".