High inflation 'could be damaging to savers'

Historically low interest rates coupled with rising inflation is depleting the cash of Britain's savers, resulting in many people being left with less money than when they began, it has been claimed.

According to the Office for National Statistics, CPI annual inflation – the government's target measure – was 3.5 per cent in January, up from 2.9 per cent in December, while RPI stood at 3.7 per cent.

Martin Bamford, chartered financial planner for Informed Choice, said high inflation is a "cruel trick" for the economy to play on savers and could prove damaging if it remains over the medium term.

"Most forecasts suggest we could see inflation fall back below the government target level within a few months, but if these forecasts are incorrect then it will not take many years of negative real returns on cash to do serious damage," he added.

Mr Bamford stated low interest rates and high inflation could put some people off saving altogether.

Britons saving up to buy their first home may find flats to rent in Kensington or elsewhere in London provides them with the perfect base to enjoy the capital while still being able to put money aside regularly.

Written by Ben Carter

Published 22nd February, 2010

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