Savers could be dealt yet another blow if UK inflation manages to overshoot its 2 per cent target next year, according to new figures.
The consumer price index, which measures the rate of inflation, hit 1.2 per cent last month, the highest rate of inflation seen in more than two years.
Inflation is expected to maintain an upward trajectory over the next year or so, despite the rate sagging to 0.9 per cent in October from the 1 per cent posted in September.
Figures from Moneyfacts show savers have very few accounts to choose from that match or beat the new inflation rate of 1.2 per cent.
The research provider found that less than a third of the 659 savings accounts currently on the market can beat or match inflation.
Rachel Springall, finance expert at Moneyfacts, said if inflation hits 2 per cent next year then it will have a “devastating” effect on savings.
“It’s hard to imagine that just one year ago 67 per cent of accounts in the savings market paid 1 per cent or more, compared to only a third doing so today, showing how cruel the past year alone has been on savers.”
She said low interest rates combined with rising inflation will deter savers, particularly at a time of year when they can choose to spend rather than save, with almost a third of consumers planning to dip into their savings to cover the festive spend.
Moneyfacts also found rate reductions in the savings market have now outweighed rate rises for 14 consecutive months, meaning the number of savings accounts that pay 1 per cent or more have halved over the past twelve months.
In November, the number of savings rate rises stood at 30, while rate decreases hit 103, with some deals falling by as much as 0.50 per cent.
Ms Springall said consumers will need to be “savvier than ever” when moving their cash to find the best possible returns, and suggested savers split their pot between fixed rates and instant access to give them a bit of flexibility and an opportunity to earn a higher rate.
“Apart from a handful of challenger banks, the savings market is starved of its competition, so anyone who relies on their savings interest will be facing some tough times ahead.”
Richard Wazacz, who heads up peer-to-peer lending platform Octopus Choice, said: “This bigger than expected rise in inflation could mark the beginning of an even more painful period for the UK's savers.
“The rising cost of living should be a shot across the bows for every UK household, and could serve as a timely warning in advance of the Christmas spending splurge.”
He warned savers need to be on red alert.
"With interest rates almost certain to stay at their current level given the uncertain economic and political climate both at home and overseas, rising inflation will make it harder than ever for savers to keep their money real.”
Mr Wazacz pointed to the Bank of England's latest inflation and interest rate prediction, which said money deposited in the average high street savings account today will be worth less in “real money” after a year.
"For savers, and anyone relying on interest for their income, the current environment of low rates and rising inflation is brutal. Worse still, there is no obvious end to the pain in sight.
"Anyone considering different options to cash in an effort to keep their money real should seek financial advice and pay close attention to the risks that come with rising up the risk spectrum."
