UK Inflation set to take it's toll on savers

Those with savings in Britain will need to seek out savings accounts offering a higher rate of interest as a result of the current rate of inflation.

This is the view of financial advice specialist Moneyfacts following the revelation that the Consumer Price Index, the government’s preferred measure of inflation, has fallen to three per cent.

Despite the fall, the rate is still higher than the government’s two per cent target, the organisation claimed.

According to Moneyfacts, it means basic rate taxpayers need to find accounts offering 3.75 per cent and higher rate taxpayers deals of at least 4.98 per cent in order to stop their savings pot "effectively eroding away".

Michelle Slade, a spokesperson for the website, said: "Despite the fall, inflation continues to erode the value of savers’ money and with rates also declining; savers are being dealt a double blow.

"Prudent savers are being neglected and are finding it virtually impossible to combat the effects of tax and inflation."

Concerns about savings could lead a number of people to seek alternative ways of raising funds, such as equity release schemes.

These policies allow homeowners to access some of the funds that are tied up in their properties.