Higher Rate Taxpayers Need 7.6pc Interest on Their Savings; PERSONAL FINANCE
Higher rate taxpayers need to earn interest of more than 7.6 per cent on savings if they are to keep pace with inflation, research has shown.
With retail prices inflation (RPI) at 4.6 per cent, savers who pay higher rate tax need to be earning returns of at least 7.67 per cent to prevent savings being eroded.
Even basic rate taxpayers need 5.75 per cent to keep up with inflation, according to financial information group Defaqto.
The group said higher rate taxpayers could beat inflation with their tax-free ISAallowance, as tax is not deducted from returns earned on money in ISAs, reducing the rate people need to receive in order to beat inflation.
National Savings & Investments also offers index-linked savings certificates, where the return paid is linked to inflation.
But it said beyond this there were very few options for higher rate taxpayers who wanted to protect the real value of their savings, despite fixed rate bonds currently offering returns of up to 7.17 per cent.
There are currently no instant or easy access accounts that pay high enough rates for higher rate taxpayers to beat inflation, while the returns on notice accounts and fixed rate bonds also fall short. …