- Rising saving returns and falling inflation could combine to help savers
- If inflation falls as forecast, cash savings will come close to generating real returns
- Standard Life analysis shows the difference between 4% and 7% inflation on cash saving is as much as £300 on £10,000
Jenny Holt, Managing Director for Customer Savings and Investments at Standard Life, part of Phoenix Group, comments on the Monetary Policy Committee’s decision to raise interest rates to 4%
"The BOE has hit a milestone by raising rates for the tenth time since 2021 with the base rate reaching 4% for the first time since 2008 when we were in the midst of the financial crisis. While this hike may add to the already squeezed finances of many households who are borrowers, the outlook for savers looks more positive. Just over a year ago the best easy access savings account offered a rate of less than 1% - now, rates of 3% are common, and you can get a bit more if you’re happy to sign up to a notice period.
"The Office of Budget Responsibility (OBR) has forecast inflation will fall to 4% by the end of 2023, and with saving rates of 3%, returns will nearly keep up. On this basis £10,000 of savings would be worth £9,888 after 12 months, but if inflation remains persistent at 7% for example the equivalent figure would be £9,579.
"For those able to take a longer-term view, putting cash into investments via an ISA or pension provides the potential for returns that can match - or even beat - inflation over the longer term as well as additional tax efficient benefits."
Impact of inflation of £10,000 of cash savings
*The above table is based on £10,000 of savings earning 3% interest in an easy access cash-based saving account
Notes to editors:
About Standard Life
- Standard Life is a brand that has been trusted to look after peoples' life savings for nearly 200 years
- Today it proudly serves millions of customers who come to Standard Life directly, through advisers and through their employers' pension scheme.
- Standard Life is part of Phoenix Group, the largest long-term savings and retirement business in the UK. We're proud to be building on nearly 200 years of Standard Life heritage together
- Our products include a variety of Pensions, Bonds and Retirement options to suit people's needs, helping our customers to invest and save for their future. We're proud to offer a leading range of sustainable and responsible investment options.
- We support our customers on their journey to and through retirement with comprehensive, easy-to-understand guidance so they can invest in the right way for their needs, and plan a future they feel confident about
- The value of investments can go down as well as up and may be worth less than originally invested.