Savers have been given a bit of a boost as the latest figures for the consumer prices index (CPI) in October 2013 show a sharp drop from the previous month.
The inflation rate falls
CPI figures, which are the standard measure for inflation showing how prices have changed over the last 12 months, indicate that the rate fell from 2.7% in September 2013 to 2.2% in October 2013.
Falling petrol prices following competition at the pumps and a smaller contribution from tuition fees contributed to the decline. Food inflation fell from 4.8% to 4.3%, which is good news for hard-pressed households.
At the same time, the retail prices index (RPI), which is a separate measure of inflation, dropped from 3.2% in September to 2.6% in October.
Better news for savers
The fall in inflation represents slightly better news for the UK’s beleaguered band of savers, although finding inflation-beating rates is still a challenge.
With inflation at 2.2%, the basic-rate taxpayer would need to find a savings account paying 2.75% to beat CPI and 3.25% to beat RPI.
Higher-rate taxpayers need to locate rates of 3.66% and 4.33% to beat CPI and RPI respectively.
As the interest earned within cash Isas is tax-free, the rate you need to earn is the same as the headline inflation rate.
Consumers still worried about savings and pensions
The drop in inflation comes shortly after the latest Which? Consumer Insight Tracker results have revealed that savings rates are still a major concern for many consumers.
The percentage of people who are worried about the interest rate on their savings has increased from 58% in September to 63% in October.
A gradual decline in rates offered by providers has made it much harder for savers to find rates that even keep up with, let alone beat, inflation. The Which? savings booster tool can help you to identify a better rate for you if you’re stuck with a poor-paying account.