UK savers lost £36bn last year to inflation

UK savers had just over 1 trillion in banks, with 110bn held in zero interest accounts, said accountant UHY Hacker Young.

The average interest paid was just 1.6 per cent on other accounts. But with inflation as measured by the Retail Prices Index running at 5.2 per cent in April, and even ISAs only paying an average of 2.57 per cent, the real value of saving has fallen by 36.45bn during the past year, once interest of 15.75bn is counted in.

Savings are also being diminished by inflation if the Consumer Prices Index (CPI) measure is used, with this running at 4.5 per cent in April, slashing the value of deposits by 29.42bn.

Mark Giddens, partner at UHY Hacker Young, whose research is based on Bank of England figures, said: "The amount of money eroded away through inflation is staggering. Unfortunately for savers, the kinds of savings rates on offer from the biggest banks are unlikely to change any time soon."

A basic rate taxpayer needs to earn interest of 5.63 per cent to make any return on their money. Higher rate taxpayers need returns of 7.5 per cent.

There are just two accounts that enable people to make a real return against inflation, both are five-year fixed rate ISAs with a maximum investment of 5,340 in this tax year.

There are currently no savings accounts available that enable people to beat inflation as measured by the Retail Prices Index.