A poll of around 1,000 adults earlier this month has found most are ignorant of the effects of retail price index inflation or tax on savings, according to National Savings & Investments.
Additionally, the situation has barely changed since a similar survey was carried out at the same time last year.
Two-thirds (64%) of respondents say they do not take inflation into account when saving assets, despite RPI inflation running at 3.5% currently, NS&I, a government executive agency, says.
That is little changed from the 66% rate recorded last year.
More than half of respondents (58%) in both years have answered they do not take tax into account when looking for a place to park their hard earned disposable income.
This research is being linked to a push by the executive agency to remind consumers of its index-linked savings certificates product range.
Although official government policy has been to switch the focus of counting inflation to a Consumer Price Index, which is the UK equivalent of the Harmonised Index of Consumer Prices used by eurozone member states of the EU – and which strips out some costs compared to RPI, such as those linked to housing – NS&I has no intention of starting to use CPI as a benchmark for index-linked savings certificates.
This is partly because the product type was first launched back in the 1970s, and would therefore make repricing of existing certificates difficult, and partly because the rates of interest paid on the certificates is linked to prices of index-linked gilts, and these are still priced according to RPI, a spokesman says.
Compared to an RPI of 3.5%, the CPI rate of inflation of 1.5% reported by the Bank of England for November is expected to rise slowly through this year, if at all, according to the Bank’s latest Monetary Policy Committee minutes.IFAonline
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