The only option for savers who want to outpace inflation
Figures out today from the Office of National Statistics (ONS) reveal the headline rate of inflation remained steady at 2.3% in March, the second month in a row it has outstripped the Bank of England’s 2% target.
Analysis of the 740 standard savings accounts on the market shows one – a five-year fixed rate bond paying 2.35% from Ikano Bank – beats inflation.
To be eligible for the bond, you’ll need a minimum deposit of £1,000 and it can only be opened online.
Rachel Springall, finance expert at rate watcher firm Moneyfacts, said: “Savers are likely asking themselves whether it’s still considered ‘saving’ if they are in fact losing money because of the inflation bite.
“As it stands, there is only one standard savings account that can outpace the current level of inflation, which means most accounts on offer today are effectively paying negative interest rates due to the inflation erosion.
“It’s true providers are not technically charging customers to hold their deposits, but if the interest rate is not outpacing inflation, the spending power of that cash will be eroded over time. As a result, there is likely to be very little incentive for savers to take out a savings account right now. This is particularly true when you consider that the high street banks can pay up to 5% on their current accounts, though these typically have restrictive criteria.”
Despite the lack of choice for beleaguered savers, the savings market has been showing signs of improvement lately.
In the month of March, Moneyfacts recorded 163 savings rate rises, with some rates increased by as much as 1.20%. This dwarfs the 65 rate reductions that took place during the same period.
The number of rate rises has now outweighed the number of reductions for three consecutive months.