Newspaper article The Evening Standard (London, England)

Switch Now to Save Your Cash; THIS IS MONEY

Newspaper article The Evening Standard (London, England)

Switch Now to Save Your Cash; THIS IS MONEY

Article excerpt


Too many deposit accounts offer such poor interest rates that customers are fast losing their money, says Stephen McDowell ALMOST half of all deposit accounts are costing higher- rate taxpayers money, and more than one in four ordinary taxpayers would be better off spending the lot in the shops, according to some startling research.

As many as 23 per cent of non-taxpayers, mostly pensioners, are being punished by shrink-ing savings, as low interest rates combine with inflation and providers' greed.

One in six deposit account providers fails to offer a single account which provides a higher rate taxpayer with a positive real rate of return after tax and inflation.

The research, by independent financial adviser Bates Investments, shows the pitiful levels of interest paid by some deposit account providers, which leave 49 per cent of higher-rate and 28 per cent of basic-rate taxpayers out of pocket.

Savers heavily outnumber mortgage holders, and those most dependent on deposit savings tend to be older and have repaid their mortgages, says Bates.

They are the most exposed to the underlying rate of inflation, which excludes mortgage payments, rather than to the headline rate, which does not.

The underlying rate of inflation fell to 1.8 per cent in May, from 2.8 per cent in April, yet many institutions are not offering interest high enough to prevent their taxpaying - and, in some cases, non-taxpaying - customers losing money.

Once tax and inflation are taken into account, basic-rate taxpayers only need gross interest on savings of 2.25 per cent to break even, as they pay a flat rate of 20 per cent tax on savings. The figure for higher-rate taxpayers, who pay an extra 20 per cent tax, is three per cent.

Thus, a higher-rate taxpayer with pound sterling10,000 savings in the three worst performing accounts - the Derbyshire Cash Account, Halifax Liquid Gold and Yorkshire Bank Cashmaster, which all pay just 0. …

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