Savers suffer 'torrent' of shrinking returns

For every rate increase taking place in the savings market there are around three rates being cut, as savers suffer a "torrent" of deals offering shrinking returns.

Moneyfacts.co.uk found that during December, there were 30 rate rises in the savings market, compared with 93 reductions.

While the rate increases were as high as 0.5%, some deals fell by as much as 0.55%.%VIRTUAL-ArticleSidebar-savings%

Moneyfacts said rate reductions have outnumbered rises in the savings market for three months in a row.

The website said savers still have less to worry about in terms of savings being eroded by the impact of rising living costs.

With Consumer Price Index (CPI) inflation at 0.2% in December, Moneyfacts said the the vast majority of the 863 savings accounts on the market can beat or match inflation.

However, the eroding effects of inflation in recent years and poor returns on savings still mean that £10,000 invested in 2010 would be worth around £9,158 today, taking into account average easy access savings rates, inflation and tax, Moneyfacts said.

Charlotte Nelson, a finance expert at Moneyfacts.co.uk, said savers in 2011 would have had access to a rate of 2.9% with an easy access account - but now the best instant access deal pays just 1.65%.

She said: "It seems providers are abandoning their savings accounts in favour of their current account offerings, which have recently been bolstered by an abundance of cash incentives to entice new customers. Savvy savers would be wise take advantage of this, as some high interest current accounts now pay returns of up to 5%.

"Sadly, the savings landscape looks set to remain bleak for quite some time yet. All savers want to do is catch a break amid the torrent of rate cuts and poor interest deals, but at the moment their only hope rests on a possible base rate rise later this year."