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No chance for savers to beat inflation

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The jump in inflation means that there are now no savings accounts on the market that offer a real-term return, new analysis from Moneyfacts has revealed.

According to the latest data from the Office for National Statistics, the consumer prices index measurement of inflation registered 1.5% in April, more than double the 0.7% recorded in March.

And that sharp increase ‒ with the forecast of further rises to come ‒ has left savers with few options.

Losing money

Moneyfacts noted that the top-paying easy access account today comes from Atom Bank, but with a rate of 0.5% it will lose you money in real terms. Indeed, even locking your money up for five years with Gatehouse Bank and securing a rate of 1.4% means you will fail to keep pace with inflation.

This situation only looks likely to get worse too, with inflation now predicted to hit 2.3% by the second quarter of next year.

It represents a sharp turnaround from March, when inflation was recorded at 0.7%. According to Moneyfacts, back then there were 90 different savings accounts paying an inflation-beating rate, though even then your money would have to be locked up for at least a year.

The contrast is even more stark when looking back 12 months. Moneyfacts’ figures show that in May 2020 there were a whopping 376 savings deals ‒ including 24 easy access accounts ‒ which beat the then CPI rate of 0.8%.

Rates have been improving

Rachel Springall, finance expert at Moneyfacts, said that the current level of inflation will have a clear impact on savers, as the spending value of their cash will be eroded away, though she noted that recent weeks have seem positive changes to the rates offered on fixed rate bonds and ISAs.

She continued: “It is hoped the positive uplift to fixed rates will continue in the weeks to come but there is no guarantee, plus if savers prefer to keep their cash in an account with quick access, then they need to be fast to acquire the top rates. Indeed, some top-rate deals – including those from Paragon Bank and Kent Reliance – were withdrawn this month.”

Look beyond cash

The fact that no accounts now offer an inflation-beating return has led to calls for savers to instead look towards the investment markets in order to get something back from the money they squirrel away.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “For money we plan to hold for five-10 years or more, we need to at least consider investment, which will rise and fall over the short term, but over the long term stands a far better chance of staying ahead of inflation.”

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