Save, make, understand money


Getting savings to beat inflation just got easier

Emma Lunn
Written By:
Emma Lunn

Inflation has fallen to a four-year low, meaning it’s now easier for savers to find an account that beats inflation.

Savers now need to find a savings account which pays 0.8% or more to avoid their spending power being eroded by inflation.

It’s good news for people with cash to stash away but Moneyfacts warns that savers should act quickly to take advantage of the top rates. If the Government’s inflation target of 2% is hit in the months to come, there isn’t a standard savings account on the market that can currently outpace it.

The Consumer Prices Index (CPI) fell to 0.8% from 1.5% in March, its lowest level since August 2016, according to the Office for National Statistics (ONS).

The new inflation figure means there are currently 376 savings accounts available that beat inflation, up from 65 that beat the previous 1.5% figure.

However, the predicted rate for inflation during Q2 2023 is 2.0%, and there are no standard savings accounts currently able to beat this.

According to Moneyfacts, there are currently 28 easy access accounts, 49 notice accounts, 28 variable rate ISAs, 80 fixed rate ISAs and 220 fixed rate bonds (based on a £10,000 deposit) that can now match or beat inflation.

Within that, 24 easy access accounts, 49 notice accounts, 24 variable rate ISAs, 70 fixed rate ISAs and 209 fixed rate bonds pay more than 0.8%.

Rachel Springall, finance expert at Moneyfacts.co.uk, says: “On the face of it, inflation remaining below the Government’s target 2% may seem as though savers have been given a lifeline to beat its eroding effects, but that optimism may not remain over the longer-term. Inflation dropping to a four-year low is good news to savers, for now at least, but savings rates are still being cut across the market.

The top five-year bond today pays 1.85% from Gatehouse Bank as an expected profit rate, but a year ago, savers could earn 2.20% on a one-year bond with Bank of London and The Middle East (BLME).

Sarah Coles, personal finance analyst at Hargreaves Lansdown, urges savers to move their money.

“Tackling a tricky hurdle becomes so much easier when it has dropped dramatically overnight. So for savers trying to beat inflation, the fact it has fallen back so far means that what was once a stretch, is now a walk in the park. Unfortunately, far too many people will still fall short,” she says, “The vast majority of savings is in easy access accounts, and while the most competitive accounts currently beat inflation, most people don’t have their money in them. Most easy access savings are with the high street giants – which offer as little as 0.1%.”

Coles suggests savers move their emergency cash (equivalent to three to six months’ worth of expenses) to a competitive easy access account and then consider a fixed savings rate for any additional savings.

“Fixing a portion of your savings means you can get a better rate. You also lock it in, which at a time of falling rates, can prove a valuable option. The interest on these accounts has also been gradually cut over the past few months, so if you want to fix, it’s best to do so sooner rather than later,” she says.