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Media centre /
Press releaseBRITISH SAVERS UNAWARE OF EFFECTS OF INFLATION31 August 2005NS&I makes Inflation-beating Savings easier National Savings and Investments (NS&I) is launching ‘Inflation-beating Savings’, a banner to promote its unique range of Index-linked Savings Certificates with the aim of raising awareness of the effects of inflation on savings as research shows British people remain largely oblivious to it. The research from the government-backed savings and investment provider shows the number of people taking it into account when choosing a home for their money has actually fallen since earlier this year. NS&I’s ‘Inflation-beating Savings’ are the only savings product range on the high street which offers inflation-beating tax-free returns. A growing problem Only one in every four savers (25%) takes inflation into account when looking to save, even though it is currently running at 2.9% (as measured by the Retail Price Index). Awareness had appeared to be growing over the last two years, with the number of people ignoring inflation gradually decreasing from 74% of savers in 2003 to 62% in January 2005. However, in just six months figures have slumped to those recorded in 2003. In August, three in every four people (74%) confessed to not taking inflation into account when looking to save. Awareness gap This rise in apathy reflects low awareness. As many as one in six (16%) Brits are unaware that inflation affects everyone, with one in ten (10%) believing it is only a concern for the well-off, ie, those with a lot of savings or high-rate tax payers. In addition, two thirds (67%) of Brits confessed they have no idea what the current rate of inflation is. “Do you take inflation into account when looking to save in a particular product?”
Those most likely to take inflation into account are aged 65+. However even in this group only a third (33%) considers the impact of inflation on their savings despite the fact they will be looking to maximise their money during retirement. Those most unaware are savers aged 16-24 - only 10% of people this age are inflation savvy. Making it simpler To combat this increasing awareness gap and make it simpler for savers to protect against inflation, NS&I has been giving its range of Index-linked Savings Certificates a ‘face-lift’ and is now launching it under the banner of ‘Inflation-beating Savings’. By introducing the name ‘Inflation-beating Savings’, NS&I is making it clearer and simpler for savers to protect their money from inflation and earn guaranteed interest on top. The launch includes new customer literature, which explains inflation and the different measures as well as how to protect against it. NS&I will also be raising awareness of the benefits of Inflation-beating ?Savings with a TV campaign throughout September, spearheaded by straight-talking entrepreneur, Sir Alan Sugar. The launch follows on from recent improvements including raising the maximum investment limit on Saving Certificates from £10,000 to £15,000 per person per Issue and the introduction of new services to make saving easier. Already available on the internet, by phone, post and through Post Offices, NS&I recently introduced the ability to reinvest maturing Savings Certificates over the telephone, removing the need to fill out additional forms. How do Inflation-beating Savings work? The ‘Inflation-beating Savings’ range consists of three and five-year Index-linked Savings Certificates. The money invested earns a return directly linked to the headline rate of inflation, otherwise known as the Retail Prices Index (RPI) – currently at 2.9% – plus guaranteed rates of interest on top. This means the returns outstrip inflation and, as nothing is taken away in tax, the spending power of your money is increased by the end of the term. Anyone aged seven or over can invest from £100 up to £15,000 per Issue (a new issue becomes available each time NS&I changes the interest rate on Saving Certificates), and they may be bought for children under seven. Rates of return Because Index-Linked Saving Certificates offer a tax-free return that beats inflation, it makes them particularly attractive for basic as well as higher rate taxpayers. Investment terms and interest rate
(These figures assume the RPI rises by 2.9% each year for the next five years and current rates of tax) Growth guaranteed Karen Jones, NS&I’s marketing director, said: “This downward trend is something of a worry. Even though we are experiencing a period of relatively low inflation, people who invest their money for more than a few years in an account that doesn’t protect against inflation could see the value of their money diminish as inflation takes its toll. “Most people know that £1,000 buys much less today than in would have 10 years ago. Yet when it comes to saving for the future, the majority of people seem to be disregarding the impact that future inflation will have on their investments. “This is why we have been giving ‘Inflation-beating Savings’ a face-lift. The new customer literature and services will combat confusion and make it easier for savers to consider the affects of future inflation and ensure their savings will outgrow it, whatever happens.” ENDS Notes to Editors 1. The National Savings and Investments survey among 1,010 adults was conducted by TNS via PhoneBus, 19-21 August 2005. 2. The rate of inflation is calculated using the Retail Price Index (RPI). The RPI measures the average change from month to month in the prices of goods and services purchased by most households in the United Kingdom (Office of National Statistics). 3. National Savings and Investments is one of the largest savings organisations in the UK, offering a range of savings and investments products to 26 million customers. All products offer 100% capital security, because they are backed by HM Treasury. 4. Further information and digital images are available from the NS&I media team. An ISDN line is available for interviews.
Media team The numbers below are for media use only. Customers wishing to contact NS&I can find details here.
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