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16 Jan 2013

Just 14 ISAs Negate Inflation Effects In December

Just 14 individual savings accounts (ISAs) managed to avoid the effects of inflation last month, which remained unchanged at 2.7% as announced by the Bank of England, price comparison website MoneySupermarket said on Tuesday.

ISAs that mitigated the inflation impact were 13 easy access accounts and one fixed-rate account.

Although the consumer price index (CPI) stayed flat and did not increase further, savers would be better to switch to an account delivering more beneficial returns if they want to deal better with the effect inflation has on their money, MoneySupermarket advised. This could be hard given the low number of options capable of beating inflation that savers could embrace, MoneySupermarket´s head of banking, Kevin Mountford, commented.

The price comparison website claimed that at the current level of the CPI, basic-rate taxpayers should have an account bringing no less than 3.39% to ensure any real benefit from their savings. For higher-rate payers, the level goes up to 4.51%, while 50% of tax payers need an account fetching a minimum return of 5.41%.

Despite the lack of options, savers should keep trying to find the most effective one and be ready to switch immediately if they encounter a better deal, Mountford said. Negating inflation effects is of paramount importance, especially at a time when people can´t afford to put money away for a longer period. With the current tax year soon coming to an end, savers should start using products such as cash ISAs to make use of the tax-free benefits they provide. Offsetting savings against mortgage borrowing or peer-to-peer lending are also among the good options as returns could prove more advantageous, Mountford added.

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