More than half of ISAs beat inflation

More than half of ISAs now offer rates that will beat inflation, according to financial information website Moneyfacts.

It said a survey revealed that out of the 215 tax-free ISA accounts on the market today, 115 offer inflation-beating returns.

Of the 619 savings accounts on the market which are not Isas and so are not ring-fenced from the taxman, there are 72 which will beat the eroding effects of tax and inflation.

This means there are 187 ISA and non-ISA savings accounts on the market which offer real returns.

This marks a sharp turnaround compared with a year ago, when none of the 820 savings accounts on the market, including Isas, could beat the May 2013 Consumer Prices Index rate of inflation, which stood at 2.7 per cent.

As the CPI measure fell to 1.5 per cent, Moneyfacts said that to beat inflation, someone paying basic rate tax at 20 per cent now needs to find a savings account paying an annual rate of 1.88 per cent, while a higher rate taxpayer at 40 per cent needs to find an account paying at least 2.50 per cent.

From next month, savers will also feel the benefits of being able to put much more of their cash away tax free, with the creation of a new “super ISA”.

As announced in the Budget, the overall limit will increase to £15,000 from July 1, and the full amount can be held in either cash, or stocks and shares, or a combination of both.

Moneyfacts cautioned that despite the pressure of inflation easing back, it is not all good news for savers, as the rates on offer are still generally poor in the low interest rate environment.

“The Bank of England underperformed its target for inflation this month, which should make it easier to find savings accounts that outperform CPI and the taxman,” said Moneyfacts editor Sylvia Waycot. “The arrival of the super ISA means we will all be able to legally stash more money away from the taxman this July, but the euphoria will be short-lived if the accounts pay so little the taxman hardly notices.”