Inflation rates 'eroding savings'

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Savers will struggle to earn interest on their money due to the pace of inflation, according to finance experts.

Defaqto, a finance information company, has calculated that basic rate taxpayers need a gross return of 6.5 per cent to stay level with the rate of inflation and higher earners need to find a rate of 8.67 per cent.

Higher rate taxpayers can still find solace in tax-free cash Isas and national savings and investments index-linked savings certificates.

Defaqto principal consultant of banking David Black said: "Outside of cash Isas even basic rate taxpayers now face a struggle to earn a real rate of return on their savings."

He added that the situation would be worsened by many rates being reduced in the next few weeks but said that hope was on the horizon in that inflation rates were predicted to fall in the coming months.

Meanwhile, the Daily Telegraph reports that pensioners are suffering from a 13.7 per cent rise in living costs a year.

Research conducted by Capital Economics for the newspaper suggests that the inflation rate for pensioners is at the highest level since the early 1990s.

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