Though the rate of inflation has been falling and presently stands at 2.7%, it is still higher than the target of 2% that the government has in its mind. This is why middle class is still feeling the heat of inflation with those dependent upon their pensions being the hardest hit as they have small incomes to make ends meet. Peter Tutton, a member of StepChange, a debt charity, is of the view that there is no respite for the millions who are living on the edge and cannot survive with the cost of living.
To escape the effects of inflation, all those who pay taxes at basic rates need to find an investment mode with returns of 3.38% per annum where as those who pay higher taxes need to find a savings account paying minimum 4.5% interest. However, out of 840 individual saving accounts available to people, only three are able to negate the effects of inflation. This was revealed by Moneyfacts expert Sylvia Waycot.
Interest paid by banks on savings account in UK has stayed at abysmally low levels for the last 4 years. People keeping their money in these accounts are in real terms losing their money. The problem with these low interest rates is that people have to either reconcile with the falling spending power of their money or take out money form these accounts and take high risk by investing in other schemes.
Experts recommend paying off your debts or mortgages rather than keeping your money in savings account as you would end up paying more by keeping the money in these accounts. However, those who can afford to take risks should invest in other attractive schemes rather than keeping money in saving accounts. This is the only way to fight high inflation and low levels of interest paid by banks.