Even though the rate of inflation is down to 1.9%, finding saving accounts that negate the impact of tax and inflation remains difficult for consumers. According to Moneyfacts, there are only 31 non-ISA accounts on the market that can effectively do this, out of a total of 627.
Given that beating the Consumer Price Index rate is therefore unlikely, what other options are available for consumers looking to protect their money?
One option is to consider an ISA – a tax-free savings account – but only 53 of 235 on offer provide rates which are capable of offsetting inflation.
Overall, that means that just 84 out of 862 ISA and non-ISA accounts are capable of offering genuine returns, meaning both options lack appeal for consumers.
What to look for in a savings account
To beat inflation, a basic rate taxpayer at 20% would require a savings account paying 2.38%, while someone paying the higher rate of 40% tax would need an account paying at least 3.17%.
With a lack of such accounts on the market, Moneyfacts estimated that £10,000 invested five years ago would now be worth £8,840 today, as low rates are slowly eroding savings.
ISAs are also not attracting much interest at a time of year when many people consider their options for the coming year.
Many customers have not yet used their ISA allowances for 2014/15 as they continue to look for a viable option.
Savers can place up to £5,760 into a cash ISA in the current financial year, while a further £5,940 can be placed into a cash ISA from April 5.
Interest paid on all ISAs is just 1.66% on average, down from 1.74% a year ago, and highlights the lack of interest in these products at present.
Searching for alternatives
Funding for Lending had previously been blamed for making banks require fewer deposits for savers as they already had cheap access to funding.
Despite the scheme now being directed towards businesses rather than mortgages, the withdrawal of it has had little impact on the savings rates available.
One alternative to placing funds into a savings account is to put them onto a prepaid card.
That way it’s possible to carefully manage your finances as only what is on the card can ever be spent, while transactions can be monitored online at any point.
There is also additional security, as the cards are not directly linked to your bank accounts, reducing the risks of fraud and identity theft.
If saving is not an option at present, then protecting your finances in a secure location could be the best alternative option.