Why saving may start to make sense again - just - Money - Business

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Basic-rate taxpayers need to find accounts paying interest of 4.5% per year to beat the erosional effect of rising prices. There are now seven savings bonds - from BM Savings, the AA, Vanquish Bank, State Bank of India, Saga, Leeds building society and Clydesdale Bank - which do so, according to Moneyfacts.

However the average instant-access savings account still only pays out 0.92%. And for higher-rate taxpayers there are still no deals on the market paying the 5.99% they would need to beat inflation, apart from tax-free ISAs.

The watering-down effect of inflation on savings means that £10,000 invested five years ago, accruing average interest and paying tax at 20%, would have the spending power of just £9190 today.

Sylvia Waycot of Moneyfacts said: "The expected fall in inflation heralds a change in fortunes for savers as more savings accounts finally offer a rate of return that beats inflation, something savers have long been desperate for.

"However, [seven accounts] are a small blessing when compared to the total number of standard savings accounts available, which is 1100."