Inflation-linked savings accounts sound great – but watch out for the pitfalls

Banks are falling over themselves to offer inflation-linked bonds to savers. But are they as good as they are made out to be? Ruth Jackson investigates.

For months now the main worry for savers has been that the interest they get on their savings is just too low for them to have a hope of keeping pace with inflation.

With the retail price index (RPI) rising at an annualised rate of 5.3%, basic rate taxpayers would need a rate of 6.6% in order to see their savings grow in terms of spending power after tax. Unfortunately, there isn't a single account on the high street offering that. And things are even worse for higher rate payers: if you pay 40% tax you need 8.8%; if you pay 50% you need 10.6% - which you haven't a hope of getting.

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Ruth Jackson-Kirby

Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.

Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.

Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping, among many other titles both online and offline.