Three ways to beat inflation

It’s tough being a saver right now. The hard truth is that, if you have any cash in the bank, it is almost certainly losing its value, once you take inflation into account. The good news is that there are some options for investors who want to guard against inflation without taking the risk of putting their money in equities. Tim Bennett explains.

It's tough being a saver right now. The hard truth is that, if you have any cash in the bank, it is almost certainly losing its value, once you take inflation into account. With the Retail Price Index (RPI for more on this, see page 44) at 5.2%, a basic-rate taxpayer needs to be earning more than 6.5% before tax to break even, while for a 40% higher-rate taxpayer the figure is a shade under 8.7%. There are no bank accounts that will pay you that kind of money. The good news is that there are some options for investors who want to guard against inflation without taking the risk of putting their money in equities.

Firstly, there's the government owned National Savings and Investment (NS&I) bank. NS&I is attracting a lot of attention just now. That's because it has recently released some new five-year, index-linked certificates. These pay the annual change in the RPI plus a fixed 0.5%. Better still, the return is tax-free, so regardless of your tax bracket, you'll beat inflation. So far, there's not much not to like.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.