According to a survey by moneysupermarket.com one in five people save less than they used to because of the rising cost of living, and over half the nation can't afford to save at all. As an alternative to saving, one in eight of moneysupermarket.com users have decided to take advantage of low interest rates to overpay their mortgage instead.
Following today's announcement by the Bank of England that inflation dropped to 4.0%, basic rate tax payers will now need an account paying at least 5.01% to gain benefit in real terms from their savings, increasing to 6.67% for higher rate tax payers and 8.01% for 50% tax payers. No easy access savings account currently beat the effect of inflation and taxation.
Commenting, Kevin Mountford, head of banking at moneysupermarket.com said: "With cuts in benefits, rises in National Insurance contributions, the lowering of the higher rate tax threshold and the general increase in the costs of living, many Brits are feeling the squeeze. Unfortunately, savings become one of the first casualties when people have to tighten their purse strings.”
