Inflation 'eroding UK's savings'

By Sarah Engle, Mon 22 Feb 2010 - Published in Banking

The UK's economic conditions are damaging people's savings, an expert has pointed out.

Martin Bamford, chartered financial planner for Informed Choice, explained that inflation coupled with the Bank of England's historically-low base rate is eroding the value of savings.

"It could be very damaging for savers if higher inflation remains with us over the medium term," he added.

In addition, Mr Bamford noted that most economic forecasts expect inflation to fall below the government's target of two per cent in the coming months, but said this is by no means concrete.

He also suggested that serious damage to the UK's savings could be done if inflation remains high for just a few years.

Recent figures from the Office for National Statistics showed that the consumer price index stood at 3.5 per cent in January, rising from the 2.9 per cent recorded in December.

The organisation claimed that the change was caused by VAT returning to 17.5 per cent after the temporary reduction of 2.5 percentage points.

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