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The 20+ savings accounts that beat inflation

Written by: Paloma Kubiak
Inflation unexpectedly remaining flat in June was good news for savers who had been expecting the rate to rise. 

Consumer Price Inflation (CPI) remained at 2.4% in June despite economists predicting it would rise to 2.6%. This means there are now more than 20 savings accounts on the market that beat inflation.

This comes as interest rates on savings accounts have been rising in recent weeks.

In fact, rates from notice accounts and fixed term bonds are at their highest point in two years.

There are now 26 fixed term accounts that match or beat inflation, meaning they pay 2.4% or more, helping to slow the eroding effect of inflation on your cash.

However, savers will need to contend with tying up their money for at least three and a half years.

The below table from independent savings advice site, Savings Champion, details all the accounts paying 2.4% interest or more:


Tom Adams, head of research at independent savings advice site, Savings Champion, said: “High levels of inflation have an impact on savers right now, so they shouldn’t accept the paltry rates on offer from the high street providers. In particular, switching to mitigate the effect of inflation is far better than leaving the funds earning next to nothing.”

Further research from Savings Champion revealed that just 2% of the savings market can beat or match CPI. As such, if savers leave their funds languishing in an easy access account paying 0.05%, a deposit of £50,000 would have fallen to just £44,520 in real terms over five years, assuming an inflation rate of 2.40%.

But moving your money to the best easy access account – paying 1.35% – would leave you with £47,489 which is £2,969 more. Choosing the best five-year rate available today would leave your £50,000 deposit better off by £6,217.

However, Sarah Coles, personal finance analyst at Hargreaves Lansdown, said savers shouldn’t fixate on the 2.4% inflation figure as it can lead savers astray.

“Instead, the aim should always be to save over the right period for your needs, at the best possible available rate today – rather than aiming for any specific magic figure,” she said.

Coles added that inflation is a backwards-looking figure and bank rates are forward-looking.

“If you’re considering putting your money away, you should be less concerned about inflation over the previous 12 months, and more interested in what happens in future.

“There are no guarantees, and surprises can always derail predictions, but the Bank of England expects inflation to fall closer to 2% over the next two years, which would mean the most competitive fixed rate bonds over every period would beat inflation if the Bank of England is correct. Of course, the longer you fix for, the higher the risk that inflation will surprise,” she said.

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