New rise in inflation makes saving cash ‘impossible’

Inflation hit a 30-year high of 6.2% in February, sparking fears that savers would be left behind amid a cost-of-living crisis.

Economists had previously forecast an inflation rate of 5.9% for the past month, but rising energy and gasoline costs sent the consumer price index tipping even higher.

Last week, the Bank of England warned that inflation is expected to reach 8% by April with the possibility of a double-digit increase in the fall, if energy prices continue to rise.

A year ago, the inflation rate was only 0.4%.

According to data from Moneyfacts, the highest paying cash ISA account currently offers only 1.6% annual interest. This means that any money saved in these accounts would lose 4.6% of its value in real terms due to rising inflation.

A finance expert from Moneyfacts said it was “an impossible task for cash savers to protect their money from its eroding impact”.

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“Rising inflation is taking its toll and not a single standard savings account can beat it today,” said Rachel Springall of Moneyfact.

“The Bank of England expects inflation to be above the 2% target for some time to come, but even if inflation were to fall to 2%, savers have few options to choose from to exceed. this rate.”

Springall added that with some ISA cash providers offering rates as low as 0.01%, “it would be wise for savers to give up and switch.”

Recent research from News Peer2Peer Finance found that Innovative Finance ISAs (IFISAs) outperformed the UK stock market over the four years from 2018 to 2021, with relatively stable returns of between eight and nine percent per annum. Over the same period, Cash ISA returns have remained below 2% per year.

Read more: IFISA: the golden ticket