According to some financial experts, now may be a bad time to start up a savings account, and a good time to shop around for better rates if you have one already. On average, anyone with a £10,000 savings deposit lost about £200 over the past year due to falling interest rates and rising inflation.
Since the Bank of England dropped its interest rate to 0.5 percent more than a year ago, savers have taken a severe hit. Combined with another increase in the rate of inflation to 3.4 percent, it is getting more and more difficult for conscientious savers to hold on to their money, much less add to it.
Reports from Moneyfacts, a personal finance website, indicate that people in a higher tax bracket are less likely to see an acceptable return on their savings. Moneyfacts said that those paying higher taxes need to get 5.6 percent on their savings just to counteract inflation and avoid losing money. Savers paying the basic tax rate only need to get about 4.25 percent. At present, the former group has a choice of four accounts paying the higher rate, while basic tax payers have a choice of at least 44.
While there are varying opinions from experts in the current financial market, most seem to agree that inflation is likely to increase in the coming months. According to official statistics, inflation rose from 3.0 percent in February to 3.4 percent in March, and with April’s record high petrol prices, it will probably go up again at the next announcement
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