Accounts that beat inflation

lucky77

In the Your Money section of Saturday's Telegraph 16/10/10 (p5) Emma Wall writes that "a basic-rate taxpayer would have to find a savings account paying 3.88% to stop cash being eroded by inflation. While there are 118 savings accounts that offer this, the story is worse for those taxed at the higher rate. People earning more than £43,876 need to earn 5.17% interest to beat inflation and have a choice of just 55 accounts."

I can only think of a few regular saving accounts that pay 5% and these are usually linked to current accounts. Any idea where this figure of 55 accounts comes from or are there lots of accounts out there no-one has told me about??

CosmicTen

The thing with regular savings accounts also is that they don't tend to accept lump sums, so they are great if you're just starting to save, but not if you have a lump to put somewhere. Difficult to find inflation beating accounts unless you're prepared to lock up for at least 3 years or more by the looks of things.

[Deleted User]

I couldn`t find any and much regret the passing of ns and i index linked certs. I have bought a considerable amount of gilts called NR40 as they pay .625% plus inflation linking. They are in the sipp as I wanted to safeguard some of my dh`s cash. Other than that it is all about risk/reward and also about tying up cash for a longish time without knowing future interest rates and inflation.

Biggles

lucky77 wrote: »

In the Your Money section of Saturday's Telegraph 16/10/10 (p5) Emma Wall writes that "a basic-rate taxpayer would have to find a savings account paying 3.88% to stop cash being eroded by inflation.

That doesn't seem right. With inflation running at 4.6%, surely a standard rate taxpayer would need interest of 5.75%?

CosmicTen

I saw the 3.88% figure on the BBC web site a couple of weeks ago as well. Didn't try and work it out though.

Sceptic001

The only account currently available that protects against inflation (RPI + 50%) is the National Counties Building Society index-linked bond, which is discussed here:
https://forums.moneysavingexpert.com/discussion/2780388

Its main drawback is that you are locked in for a fixed five-year term.

I presume the 3.88% figure is based on the CPI (consumer prices index) inflation rate rather than RPI (retail prices index).

Cautious_Investor_3

Biggles wrote: »

That doesn't seem right. With inflation running at 4.6%, surely a standard rate taxpayer would need interest of 5.75%?

You are quoting RPI, they are quoting CPI.

Cautious_Investor_3

Sceptic001 wrote: »

The only account currently available that protects against inflation (RPI + 50%) is the National Counties Building Society index-linked bond, which is discussed here:
https://forums.moneysavingexpert.com/discussion/2780388

Its main drawback is that you are locked in for a fixed five-year term.

I presume the 3.88% figure is based on the CPI (consumer prices index) inflation rate rather than RPI (retail prices index).

Hi

Five years could be considered a long time, however at least you know the return will be linked to RPI and for nil / basic rate tax payers it will provide an inflation beating return.

I wouldn't be surprised if the account closes very quickly, it is a very attractive rate.

I've found an unbiased review of it here:

http://www.!!!!!!.uk/technical-area/savings-investments/account-in-focusinflation-beating-returns-from-the-national-counties-index-linked-savings-bond-2nd-issue/

The Cautious Investor

Sceptic001

Thanks, Cautious Investor, that is a useful article, but it has a very bad typo on a crucial detail:

The account is guaranteed to produce a return of at least 7.50% gross AER.

should read:

The account is guaranteed to produce a return of at least 7.50% gross over 5 years, equivalent to 1.46% AER.

EDIT: The article has now been corrected.

lucky77

Looks like it's not just me then who is unaware of these 55 savings accounts paying 5% plus. I guess the statement is pure fiction or a serious misprint!

Reaper

I expect it is a misprint and should read "... have a choice of just 1 out of the 55 accounts available"