Inflation drops to 4.00% but savers are still struggling

Inflation drops to 4.00% but savers are still struggling

12 April 2011 / by Rachel Mason

Julie Smith, savings analyst at Fair Investment Company comments on news that the annual rate of inflation has fallen from 4.40% to 4.00%.

"The UK CPI annual rate of inflation has fallen from 4.40% in February to 4.00% in March – the drop has been attributed to a sharp fall in the cost of food and drink but has come as a bit of surprise to City analysts who had been predicting a rise.

The drop means borrowing costs are unlikely to rise - welcome news for many - but inflation is still double the Bank of England's target of 2.00% which means that savers are still struggling to find good returns. 

Even tax efficient cash ISAs need to be offering more than 4.00% just to beat inflation.

"As a result, many people are now considering moving out of straight savings accounts and cash ISAs in search of better returns. If you are thinking of taking a bit more risk, it might be worth considering a structured deposit plan.

"These are available in a cash ISA wrapper and can provide an alternative cash ISA option that could potentially offer a 'real' rate of return.

"There are various types of structured deposit plans available, all of which can be used in a cash ISA and are eligible for the Financial Services Compensation Scheme."