Britain's millions of savers will find the value of their investments wiped out by the increase in the cost of living, financial experts said.
Not one of the 1,660 savings accounts on the market being offered by banks or building societies, including the most generous Individual Savings Accounts, offers a real rate of return of more than 5.3 per cent. This is the first time that no account has been able to match the rising cost of living, according to the personal finance website Moneynet.
The Office for National Statistics said that inflation, as measured by the Retail Prices Index jumped from 4.4 per cent in March to 5.3 per cent in April. The RPI is widely accepted as the truest measure of the cost of living because it includes housing costs.
This is the highest level it has been since 1991.
The jump, which took economists by surprise, came after consumers suffered from record prices at the petrol pumps, higher mobile phone and telephone bills, an increase in food and drink prices as well as rising mortgage rates and the cost of clothing.
Many of the increases came from tax rises announced in Alistair Darling's last budget, which pushed up the price of alcohol and vehicle duty. The restoration of VAT to 17.5 per cent has also had the effect of increasing prices on nearly all items on the high street.
The rise in the cost of living dwarfs the average increase in wages, which on average are just 1.9 per cent higher than a year ago, meaning most workers are suffering from a significant fall in their standard of living.
Though the governor of the Bank of England, Mervyn King, said that inflation would "wane over time" he admitted the timing of any fall was "highly uncertain".
Financial experts said savers were the real victim of stubbornly high inflation, which has increased for the eight consecutive months.
Ros Altman, a former adviser to the government and an experts on savings and pensions, said: "The Government keeps on saying high inflation is temporary. But anyone with a fixed saving is losing out. And savers were one of the biggest losers already from the recession."
Inflation has the effect of damaging savings, because even though the investment can increase in value, it cannot keep pace with the increase in prices on the high street.
Ms Altman said: "The effect of inflation is insidious. It creeps up on you. You think you are getting more money every year, through wage increases or interest earned on your savings, but when you go out and try to spend you money you realise you can't afford what you used to be able to.
"You end up poorer. It is as simple as that."
Any interest earned from a saving account is taxed, so a bank account now needs to offer interest of at least 6.63 per cent for basic rate taxpayers and 8.83 per cent for higher rate taxpayers to make any real return.
There is not a single saving account that offers more than 8 per cent and just one, from HSBC (LSE: HSBA.L - news) , that offers more than 6.63 per cent, but that requires people to open an account that costs a fee of £15 a month and customers have to make regular monthly deposits.
Though no bank or building society can offer an account that beats inflation there is just one product that can. It is a bond sold by the Government-run National Savings & Investment, a savings product which requires the investor to tie up their money for three years, but promises to pay out interest of one percentage point above RPI.
Andrew Hagger at Moneynet said: "In recent months more and more people are looking to savings products, but they have been hit by the double whammy of low rates and high inflation. If VAT goes up to 20 per cent they will be hit even harder."
The group that are hit the hardest by high inflation are pensioners, living on a fixed income. David Black at Defaqto, a research house that specialises in personal finance, said: "Savers are faring pretty badly, especially those older people who rely exclusively on their savings. There are lots of accounts paying just 0.1 per cent."
According to the Bank of England the average savings account pays out a mere 0.18 per cent, while the average cash ISA is paying 0.46 per cent.
Ruth Lea, the economic adviser to the Arbuthnot Banking Group, said: "Savers will be sitting on loses. And what is the small saver expected to do? Put it in shares? Well, that's pretty risky. With capital gains tax on the rise, investments as a whole have taken a turn for the worse in recent weeks."
The Consumer Prices Index, the government's preferred measure of inflation which strips out the cost of housing, also increased, climbing from 3.4 per cent to 3.7 per cent. This was a 17-month high and the third consecutive month that it has breached the Treasury's target of 2 per cent by more than a full percentage point.
As a result, Mr King, was forced to write a letter of explanation to the new chancellor, George Osborne.
He blamed higher VAT, a sharp rise in petrol costs and the weak value of the pound, which has forced up the cost of imports. He admitted "inflation has been somewhat higher than expected over the past year and the Committee is conscious that the pace and extent of the prospective fall in inflation are highly uncertain."
Most economists are hopeful that inflation has peaked and will start to fall over the next few months and that the Bank of England will not raise interest rates until next year.
Jonathan Loynes, chief economist at Capital Economist, said: "We continue to expect interest rates to stay where they are for a long time."