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Savings warning as Britons set to be 'worse off' over time – act soon for best returns

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Savings could be impacted as inflation figures were released today. The Office for National Statistics (ONS) confirmed that CPI has risen, and it is now expected to increase to around four percent by the end of 2021. Inflation is the rate at which prices are rising, but is also considered as the decline of purchasing power of currency over time. Understandably, this is a concerning prospect for savers after a tough and challenging 18 months, and many will be concerned about what this could mean for their money.

Experts have warned, though, that it will be important not to ignore the matter in the hopes that it will go away. Instead, Britons will need to take action to ensure they do not end up missing out. 

Matthew Roche, Associate Investment Director at Killik & Co said: “Despite a temporary dip last month, August’s 3.2 percent jump in the Consumer Prices Index is the biggest increase since records began in 1997 and a larger rise than had been expected.

“While the Office for National Statistics expects the August increase to be temporary, some economists are predicting inflation reaching four percent by the end of the year. 

“This is of account of a record number of job vacancies and wages rising at fast rates, especially as ongoing skills shortages and subsequent supply chain issues are forcing employers to increase pay to compensate workers who are feeling the strain of a shrinking workforce.

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“In addition, history suggests, that such portfolios should also deliver higher average annual total returns over time, thus helping to insulate savings from inflation.”

Recently, savings rates have continued to improve, and according to analysis the situation is becoming more advantageous for savers. 

However, while savings rates have improved, the dramatic rise to inflation is not favourable, and is effectively overshadowing any improvements which have recently been charted.

Now, experts have noted, there is not one standard savings account which can beat inflation’s “eroding power”. As a result, Britons who are still keen to save will need to consider their options carefully.

Rachel Springall, Finance Expert at Moneyfacts, also provided insight into the matter, and said: “Savings rates have improved vastly since last month which will be great news for consumers looking for a competitive return on their cash. 

“However, inflation overshadows the positive shift, as the latest figure of 3.2 percent is the largest rise month-on-month since records began and not one standard savings account can beat its eroding power.

“There is an expectation for inflation to stay above the Bank of England target of two percent for some time yet, but it is vital savers do not become apathetic as they could miss out on some of the best rates we have seen all year.

“Locking cash away for longer may not be feasible for some, indeed consumers may be reluctant to invest longer than a year at most due to the impact of the coronavirus pandemic on their financial health. 

“However, savings providers are keen to draw in business and fixed rates have been rising substantially in recent months. 

“Keeping abreast of the changing savings market is vital, as savers could stand to miss out if a deal has a short shelf life or becomes oversubscribed quickly, so signing up to rate alerts and newsletters is wise. 

“Due to the refreshing change to the market, it would not be too surprising if some savers decide to wait a little longer in the weeks ahead expecting more improvements to surface.”

 



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