Annual consumer price inflation (CPI) fell to 3% in January, down from 3.1% in December, according to the Office for National Statistics. It means the figure has fallen for four consecutive months since reaching a peak in September last year, although the latest decline was smaller than analysts had been expecting. Considerable downward pressure had been exerted on the CPI figure by falling transport costs resulting from a drop in the price of fuel, and falling housing and household service costs, including declining rents and lower energy bills. However, this was largely offset by upward effects in areas including recreation and culture and clothing and footwear.

"The smaller than expected fall in inflation postpones but does not remove the risk of deflation later in the year," said David Kern, chief economist at the British Chambers of Commerce. "It is critical that these figures do not deter the Bank of England and MPC from pursuing forceful policies aimed at curbing the seriousness of the recession."

Retirement savers are being penalised as key tax breaks have failed to keep pace with inflation, according to MetLife. Four out of seven tax breaks analysed over the period from 1997 have lagged inflation by as much as three times with inheritance tax (IHT) affected the most. If the IHT threshold had been raised in line with house price inflation it would be £547,505 compared with £312,000 at present. Amongst the other tax breaks which have significantly failed to keep pace with inflation are ISA limits, higher rate tax thresholds and the personal gift allowance.

"Savers need to keep in mind the effect inflation is having on their tax breaks," said Dominic Grinstead, strategic development and marketing director at MetLife.

The best savings interest to be earned on the most popular savings accounts, no notice savings accounts, currently averages between 3.3% and 4.14% before income tax is deducted. UK inflation has jumped to 4.4%, more than double the Government's 2% inflation target and inflation is predicted to increase to 5% or more before the end of the year. Many savers do not seem to realise the impact inflation will have on their savings accounts.

Even the best savings accounts, in terms of those paying the best savings interest, are not immune from the effects of inflation. In real terms inflation will not only erode the income earned from the interest on savings, but will also depreciate the original savings deposit invested. This is at a time when all other costs seem to be on the rise, from gas and electricity prices, to the cost of petrol, to the cost of food.

The interest on savings that you would need to earn from your savings account if you're a low rate tax payer, paying 20% income tax, is 5.50%, just to break even against inflation of 4.40%. The interest on savings that you would need to earn from your savings account if you're a higher rate tax payer, paying 40% tax, is 7.33%, just to break even against inflation of 4.40%.

Exclusive research by Moneyfacts.co.uk reveals that only 12% of no notice savings accounts have a savings interest rate of 5.50% or above; and there are only 9 savings accounts that pay savings interest of 7.33% or above.

So the moral to my blog this week is to compare savings accounts or use our savings account finder to ensure that you're getting the best savings interest on your savings account to battle against the inflation demon.