Savers face further punishment from inflation, says expert

Inflation remained above target during September, meaning Britons face an ongoing battle to protect their savings from the eroding effects of upward price pressure, according to one expert.

Michelle Slade of Moneyfacts made her comments after the Office for National Statistics confirmed the annual rate of change of the consumer price index had remained at 3.1 per cent last month.

The Bank of England's government-set target is two per cent.

She warned that in order to maintain the spending power of their deposits, a basic rate taxpayer will now need an account offering an annual return of 3.88 per cent.

Those paying 40 per cent tax will have to find an interest rate of 5.17 per cent to protect the value of their capital, Ms Slade added.

Analysis from Moneyfacts shows there are currently 118 accounts on the market that offer inflation-busting returns for basic rate taxpayers and another 55 for those on the upper rate.

Of these, a total of 53 are ISAs.

"For savers seeking the safe haven of a deposit account, their best prospect for beating inflation is a cash ISA," Ms Slade commented.

In April, the government raised the annual contribution limit for these accounts from £3,600 to £5,100.