Protecting your savings from Inflation:
With RPI hitting 5% in September 2008 i thought it was time to see what accounts allow a real positive return and it is not good.
RPI at 5% means a basic rate tax payer needs a gross return of 6.25% and a 40% taxpayer needs 8.33%. If you are not getting these rates on your current savings accounts your savings are losing value in real terms. Even many ISA’s are paying less than 5% so also bad news.
The best of the bunch for ISA’s is the Post Office paying 6.25% on £1 minimum. If you don’t have that amount consider the HSBC ISA paying 6.25% on minimum £1.
The best of the fixed rate bonds are ICICI 7.2% requiring £1000+ and the AA paying 7.21% on minimum £500+ . These will give inflation beating returns for a standard tax payer but not if you pay 40%.
For fully regulated regular saver accounts the best are Darlington Building Society requiring a minimum of £50 per month paying 8% and the Chorley Building Society santa Saver paying 8.25%. Great for a basic tax payer but not so good if you are a higher rate tax payer.
The Government backed NS&I savings certificates pay 1% plus the RPI over 3 years or five years-or 6% this is equivalent to 10% for a higher rate tax payer so well worth considering if you can afford to lock your money up for that time.
Two others but with greater risk are the Halifax International regular saver paying 10% but as it is offshore if disaster strikes you are not fully protected and Zopa, Zopa again has greater risk although i use it and currently over the last couple of months an estimated return of 10% after anticipated bad debts and fees is feasible. (again you are locking some of your money up for 3 or 5 years) If zopa interests you i blogged about it previously.
One final thought is that the Bank of England forecasts RPI tumbling next year and with swap rates falling it is unlikely many of the higher rate fixed rate bonds will be around much longer so might be worth grabbing one while they are still available.
More information on all the latest savings rates is available at http://www.carpetbagging.co.uk