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19 Sep 2012

Number Of Inflation-Beating ISAs Ticks Up

The number of individual savings accounts (ISAs) that negate the effects of inflation is slightly up from last month after the latest drop in the consumer price index (CPI), according to research by Moneyfacts.co.uk released on Tuesday.

According to the latest figures, there are 129 inflation-beating ISAs on the market, against 128 last month. Overall, in addition to the ISAs, there are also three notice accounts and 66 fixed-rate bonds that beat inflation out of a total 1,017 savings accounts, compared with three notice accounts and 96 fixed-rate bonds out of a total 1,092 savings accounts in August.

Inflation eased to 2.5% in August from 2.6% in the previous month, after rising in July for the first time since March.

According to data from MoneySupermarket.com, to negate inflation, basic-rate taxpayers need an account that pays at least 3.14% for real-term benefits from their savings. For higher-rate taxpayers and 50% taxpayers, the account will need to pay 4.18% and 5.01%, respectively.

MoneySupermarket.com's head of banking, Kevin Mountford, said that savers should make sure their rates are the most competitive available on the market, especially in view of the significant fall in rates on savings accounts over recent weeks. He also noted that rates on top-paying savings accounts were still nearly six times above the base rate.

The latest drop in CPI may have brought relief for savers who have seen inflation erode their investments but this may prove short-lived as CPI looks likely to start increasing again soon, on the back of an expected rise in food, petrol and energy prices.

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