You are here: Home - Saving & Banking - News -

Are your savings keeping pace with inflation?

Written by: Emma Lunn
As inflation continues to rise, the number of accounts that can keep your cash in line with the cost of living is falling.

According to Savings Champion, there are 176 savings or current accounts that match or beat CPI inflation.

CPI inflation increased to 0.7% in January 2021, up from 0.6% in December 2020.

Savers are likely to need to tie up their money for at least two years in order to safeguard it against the eroding effects of inflation.  The best easy access savings account at the moment is from ICICI Bank and pays 0.6%.

Islamic banks lead the way

Gatehouse Bank – a Sharia-compliant bank – is paying 1.1% AER on its 2 Year Fixed Term Account.

Gatehouse is also offering the very best rate currently available at 1.5% AER, although you’d have to tie your money up for five years.

According to Savings Champion, if you leave your funds languishing with a high street easy access account earning just 0.01%, a deposit of £50,000 would have fallen to just £46,436 in real terms over five years, assuming an inflation rate of 0.7%.

But if you choose the best five-year rate available today paying 1.5%, it would be worth £52,018 in five years’ time in real terms.

Anna Bowes, co-founder of Savings Champion, said: “This rise in inflation is likely to be the start of a more persistent increase, making it even harder for cash savers. Not only is the cost of living for many likely to become more expensive, there are – and are likely to increasingly be – fewer savings accounts to choose from that match or beat the rate of inflation, as there is no sign that the Bank of England Base Rate will increase any time soon.

“However, those who have yet to move their cash from NS&I or leave their cash festering with a high street bank will feel the effect of inflation more than others – they are already being robbed of interest and capital, as these providers are paying some of the worst savings rates on the market. With inflation on the rise this will only get worse.

“But savers do not have to take this lying down and accept paltry rates – switching to mitigate the effect of inflation is far better than leaving the funds earning next to nothing. And by taking advantage of best buy rates, they are reducing the effect of inflation on their hard-earned savings.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week