Sole saving account beats inflation

Coins in handThe number of inflation-beating savings accounts on the market has shrunk from 227 a year ago to just one today, according to a financial website.

Moneyfacts found that of the 804 accounts on the market, including Isas, the only one to beat inflation and basic rate tax is a fixed-rate seven-year bond from Skipton Building Society, paying 3.5%.
The eroding effect of inflation on savings means that £10,000 invested five years ago has the spending power of just £8,842 today, when taking average interest and basic rate tax into account. spokeswoman Rachel Springall said the choice of savings accounts available generally has fallen by around one-quarter over the last year as the "damaging" fallout from a Government scheme called Funding for Lending continues.

The scheme has given lenders access to cheap finance in order to help borrowers. This has given the mortgage market in particular a boost, but has made providers less reliant on having to offer attractive savings accounts to pull in savers' money.

There was further bad news for hard-pressed savers last week, when the Bank of England indicated that historic low interest rates are here to stay for the next few years.

Campaigners have argued that continued low interest rates are causing harm to any economic recovery by damaging their ability to spend on the high street.

Looking for somewhere to stash your money? Check the latest savings rates

Ms Springall said that a year ago there were 227 accounts, including 128 tax-free Isas, which would have given savers real returns on their money.

This time last year, a saver could have been paid a rate of 3.5% on a bond which would have locked their money away for just two years, rather than the seven-year deal being offered by the Skipton.

Ms Springall said: "These are dark days for savers as there is only one standard savings account to beat basic rate tax and inflation, a seven-year bond which is a long commitment.

"Savers would be wise to be wary of locking their money away for the long term. The market remains volatile so opting for an easy access account to move money more freely is a safer option."

7 ways to improve your retirement
See Gallery
Sole saving account beats inflation

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.

Read Full Story