Menu

Double whammy for savers as inflation and extended FLS bites

The Momentum UK Team 24 April 2013

Apparently inflation remained steady in March, with CPI holding at 2.80% for another month; but for the hard pressed saver, the fact that inflation has stayed put will offer little respite.

The new tax year has not brought the usual plethora of competitive ISA rates and those that have been offered, have disappeared so fast, blink and you probably missed them. For tax payers, there are just 8 savings accounts that are paying a rate of 2.80% or more. All of them are ISAs, and they require you to either tie up your money or to jump through several hoops in order to qualify. For non-taxpayers, there are also a couple of non ISA fixed rate bonds that are paying a gross rate of more than 2.80% - but that’s it.

While the cost of petrol and diesel has risen at a slower pace than last year, drivers will see scant improvement overall as one of the higher increases for March was car insurance prices. With recent reports suggesting the over 50s are ditching their cars in favour of other forms of transport and even walking or using peddle bikes, it’s easy to see why. Perhaps the worrying factor is that this is that the older generation is supposed to have the most disposable cash, yet even this group is having to cut back.

Savers’ suffering looks set to continue with news that the Funding for Lending Scheme (FLS) will be extended until January 2015 (from January 2014). The scheme was launched to help borrowers by making cheap lending more accessible, however the knock on effect for savers has been disastrous. The appetite from providers to raise money from savers by offering competitive interest rates has all but disappeared.

The rates available on the Best Buy easy access accounts have fallen by 38% since last summer when the scheme was first launched, from 3.25% AER to around 2% AER – so for those who depend on their interest to supplement their income, they may be in for a real shock when shopping around for a new home for their savings.

Momentum