It’s true that too little is being lent in our moribund economy – but rates are so low that they can’t protect savings from inflation
There is a lot of justifiable angst about lack of borrowing in the economy and what can be done to persuade the banks to start lending again.
But it is also worth sparing a thought for savers, especially those who rely on income from their savings. With the consumer prices index now at 2.6%, a 20% basic rate taxpayer needs to find an account paying 3.25% to offset the impact of inflation. A 40% taxpayer needs an account paying at least 4.3%.
According to Moneyfacts, which monitors UK savings products, there are 1,092 savings accounts available on the market and only 227 of them will offset the inflation rate (and then only just). Of those, 128 are ISAs and 96 are fixed-term accounts. There are just two notice accounts that allow savers to stay ahead of inflation (by 0.05% and 0.1%) and not a single no-notice account.
For higher rate taxpayers there is just one account that won’t see the value of their savings eroded. But don’t rush – there’s a drawback. It’s a five-year bond, offered by the Yorkshire and Clydesdale Banks, and hopeless for those seeking income because the 4.39% interest is paid only on maturity.