Savers could lose money in real terms if they don’t shop around for accounts that beat inflation, according to Savings Champion.

The inflation rate, as measured by CPI, remained at 1.7 per cent in September, staying below the Bank of England’s target of 2 per cent.

But while this should be good news for savers, a drop in competition among savings providers and therefore best buy rates, means that the number of inflation-beating savings accounts currently available has dropped and there are now just 216 accounts that match or beat inflation.

But there is some good news, in that “notice” account rates have been pretty resilient and there are accounts that require as little as 95 days’ notice that are paying up to 1.8 per cent – and so beating inflation. So, savers no longer need to tie up their money to keep pace with the current cost of living.

Fixed rate bonds pay the most

However, for those happy to tie up their money, fixed term bonds offer the highest rates. For example, Al Rayan Bank is paying an expected profit rate of 2.05 per cent on its 12-month Fixed Term Deposit Account. The bank’s 36-month Month Fixed Term Deposit is paying an expected profit rate of 2.4 per cent.

There are also a number of inflation-beating current accounts and children’s savings accounts that could be used to counteract the effects of inflation – albeit usually for smaller amounts and/or with fewer savers able to access those accounts.

Anna Bowes, co-founder of Savings Champion, said: “Although CPI inflation has remained at 1.7 per cent in September, savings rates have been falling recently as general uncertainty means that the expectation for a base rate cut has increased and as a result, competition among providers has waned.

“Those who leave their cash festering with a high street bank will really feel the effect of inflation – they are being robbed as high street banks pay some of the worst savings rates on the market. The good news is that while competition has slowed recently, there are still far better rates to be found elsewhere. It’s time to perhaps put your cash with a provider that you are less familiar with as it still remains vital for savers to choose the highest-paying accounts to try and mitigate the effects of inflation.”

Losing money in real terms

If you leave your funds languishing in an easy access account paying 0.15 per cent, a deposit of £50,000 would have fallen to just £46,304 in real terms over five years, assuming an inflation rate of 1.7 per cent.

But if you were to choose one of the best easy access accounts available today, paying 1.45 per cent AER, while the real value of your money would still be lower, it would be worth £3,084 more, at £49,388.

Better still if you choose the best five-year rate available paying 2.36 per cent AER, it would be worth £5,340 more (at £51,644) and, more importantly, it would be worth more in real terms.