Inflation fall benefits savers

The sharp fall in UK inflation to an annual rate of 0.5% in November is a boon for savers, says the Financial Times.

The majority of cash ISAs pay interest at a higher rate than this, so for the first time in years savers are getting a real return. A basic rate taxpayer needs interest before tax of 0.6% to beat the current inflation rate while a higher rate taxpayer needs 0.83%.

Inflation is likely to stay low for several months, but excluding the oil and food effects underlying or ‘core’ inflation is still about 1.5%, so most savers are still getting negative returns on their cash deposits.