Premium Bonds £1m jackpot slashed in HALF – ‘silent killer’ is destroying all your savings

Inflation ‘going to get worse’ warns Sir John Gieve

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Inflation is known as a “silent killer” because it destroys the value of your savings, without you even realising it. Now the Bank of England has let it run amok, by holding interest rates too low for too long, and savers will suffer even more pain.

Here’s a good example of how inflation savages the real value of your money. Every month, Premium Bonds give savers a shot at winning one of two £1 million jackpots.

£1 million sounds like a grand sum, but it isn’t what it was. National Savings & Investment (NS&I) set that jackpot way back in 1991, when a million really was worth a million.

Today, its real value has halved to just £500,000. That’s because the prize pot has stayed the same, while the cost of living has soared.

If the Premium Bonds jackpot had kept up with inflation, it would pay £2 million today.

Now it will erode at an ever faster pace as inflation skyrockets.

Inflation is currently 5.4 percent but it is only going one way and that’s upwards.

Bank of England policymakers repeatedly ignored warnings last year (including from yours truly) that inflation wasn’t going to be transient, as it naively insisted.

Now it has finally admitted that higher inflation is here to stay and will hit 7.25 percent in April.

Judging by the BoE’s dismal forecasting abilities, it could fly even higher, as energy prices go berserk.

One year of 7.25 percent inflation would reduce £500,000 by another £33,800, further shrinking the value of that jackpot.

The rest of your savings face a similar onslaught.

Inflation of 7.25 percent would more than halve the real value of £10,000 to just £4,966 after 10 years.

Anybody who leaves money in a deposit account with one of the major high street banks, which pay an outrageous and insulting 0.01 percent, will see their savings annihilated.

Shopping around for higher savings rates it is vital, and there are signs that some of the smaller “challenger” banks are taking action, with RCI Bank raising rates on its 95-Day Notice Account to 0.90 percent.

RCI now pays 1.15 percent on its one-year bond, and 1.85 percent for savers willing to fix for five years.

These are miles way below the current inflation rate, so the value of your money will still fall in real terms, just at a slightly slower rate.

Savers should think twice about locking into a fixed rate today, because the BoE is likely to increase interest rates by another three or four times this year, in a belated bid to curb the inflation it has helped unleash.

Once again, savers are stuck between a rock and a hard place. Does the Bank of England care? It doesn’t look like it.

It abandoned savers after the financial crisis by slashing base rates almost to zero in March 2009, while rushing to bail out the greed-addled banks.

Millions who did the right thing by carefully building up their savings pots over the decades have been getting next to nothing in return since.

That was bad enough when inflation was low. It’s an even bigger scandal now that the BoE has let this silent killer loose.

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