The rate of inflation has risen unexpectedly, with the increase blamed on higher prices for computer games, theatre tickets and other cultural pursuits.
The jump in the cost of living comes after the Bank of England raised its base rate at the start of August. However, research from financial data provider Moneyfacts reveals that less than 1% of savings accounts are beating inflation – which means that money held in the vast majority of accounts is actually falling in value.
Latest data from the Office for National Statistics shows that the consumer prices index (CPI) measure of inflation rose to 2.7% in August, up from 2.5% the previous month and confounding economists’ expectations of a slight decline to 2.4%.
According to Moneyfacts, 85% of the standard savings market pays less than 2% interest, based on a £10,000 deposit. The company’s finance expert, Rachel Springall, said: “Savers who want to get a better rate should prepare to change their savings habit.”
So what are your options if you want to make your money work harder?
Think Outside The Bank
Peer-to-peer (P2P) lending is an increasingly popular option for those seeking to beat inflation by taking additional risk – especially now that investments can be held within an Innovative Finance ISA (IFISA) for tax-free returns*.
The UK government introduced the IFISA in 2016 and new figures from HM Revenue & Customs reveal that investors subscribed to a total of 31,000 IFISA accounts during the tax year ending 5 April 2018. The average investment was £9,355, compared with the average for Cash ISAs of £5,114.
LendingCrowd’s Growth ISA was one of the first IFISAs on the market, allowing investors to quickly and easily build a diversified portfolio. It targets a return of 6% a year but has exceeded this, delivering an average return of 8.5%** for current investors. Please remember that, as with any investment product, your capital is at risk.
You can open a Growth ISA with as little as £1,000 to instantly create a diverse portfolio of loans to established and creditworthy British businesses. Your capital and interest repayments will reinvest automatically, further increasing your diversification over time.
Invest now and you can also earn up to £500 cashback with our Autumn Windfall 2018 Cashback Offer! Terms apply – find out more.
*Capital at risk. Tax treatment depends on the individual circumstances of each investor and may be subject to change in future.
**8.5% is the average annualised return for all current LendingCrowd accounts that have been open for at least three months. This does not include promotional earnings.