Assetz: Savers must earn ISA returns of 1.84pc to beat inflation
ISA SAVERS will have to earn a minimum annual return of 1.84 per cent in order to ensure that their savings can keep up with the rate of inflation, according to a new study by Assetz Capital.
The peer-to-peer business lender has created a new ISA calculator which will help savers and investors to find out exactly how much they can earn through the tax-free wrapper.
Savers in the basic, higher and additional rate tax bands who invest the full £20,000 allowance into an ISA this tax year will need to guarantee a minimum rate of 1.84 per cent to beat inflation.
Non-ISA savers who invest the same amount of money in a non-ISA wrapper will need to earn 2.3 per cent if they are basic rate taxpayers, or 3.34 per cent if they are in the additional rate tax bracket.
However, Assetz pointed out that the average one-year fixed rate ISA was returning just 1.35 per cent in January 2019, meaning that most cash savers are set to lose money in real terms.
Read more: Assetz Capital attracts £10m into 90-day account in just one week
“There is a lot to consider when choosing an ISA, but people are often unaware of the quiet threat of inflation to their investments,” said Stuart Law, chief executive of Assetz Capital.
“With more money in ISAs than ever before, and inflation overtaking rates of return, consumers have a right to know whether their cash is increasing, maintaining or even decreasing in value over time.
“With the base rate currently below one per cent and speculation rife that it may fall again in the future, it’s unlikely that the banks will increase interest rates to a level that covers inflation any time soon.
“It would be of little surprise, then, if investors follow the trend of recent years by eschewing the meagre returns of conventional cash ISA offerings in favour of the third way offered by the Innovative Finance ISA (IFISA).
“While it is an investment rather than a bank account and therefore capital is at risk, we’re already seeing record levels of subscriptions to our IFISA, and we expect to reach £100m invested through our IFISA shortly.”
Read more: Assetz lines up over £110m in institutional money as platform grows
