Save, make, understand money


Over 100 savings accounts now match or beat inflation

Joanna Faith
Written By:
Joanna Faith

There’s good news for savers – over 100 savings accounts now pay an interest rate that matches or beats inflation.

Data published this morning shows consumer price inflation (CPI) dropped to a two-year low of 2.10% in December due largely to falling petrol prices.

This means savers now need an account paying just 2.10% or more to stop the value of their money being eroded in real terms.

And they have 106 accounts to choose from, according to rate monitoring firm Savings Champion, up from 51 in December and just 29 in November. A year ago, when inflation was 3%, not a single standard savings account could beat it.

In other good news, the shortest term they need to tie their money up for is just one year, with Gatehouse Bank and Al Rayan both paying an expected profit rate of 2.10%.

The last time the shortest inflation-beating term was one year was November 2016 when CPI was just 1.20%.

If you want to beat inflation, the 18-month fixed term accounts from BLME and Al Rayan Bank pay 2.25% and 2.30% respectively.

Of course, the longer you tie your money up, the better the rate, with Al Rayan paying 2.40% on its two-year bond and Atom Bank and Tandem Bank both paying 2.30%.

For three-year bonds, Al Rayan tops the table again with a rate of 2.50%, while Atom and Tandem both pay 2.40%.

If you can tie your money up longer, you can earn 2.70% with Vanquis Bank’s five-year bond, while BLME offers 2.75% on its seven-year product.

There are also a handful of high interest current accounts paying up to 5% interest – such as TSB and Nationwide – but these come with strict conditions and not all savers have access to them.

Easy access accounts

If you want to be able to withdraw your money immediately, there are no easy access accounts that beat or match inflation.

But by choosing the highest-paying accounts, you can at least mitigate the damaging effects of inflation.

The current best buys are Marcus Bank, Virgin Money and the West Brom building society, which all pay 1.50%.

Analysis by Savings Champion shows £50,000 in an easy access account paying 0.15% would be worth £45,404 in real terms over five years, assuming an inflation rate of 2.10%. The same amount would be worth £48,548 in an account paying 1.50% – £3,144 more.

Tom Adams, head of research at Savings Champion, said: “Those who need more access to their money still do not have to accept paltry rates – particularly from the big high street brands.

“If savers can’t tie up their funds, switching to at least mitigate the effect of inflation is far better than leaving the funds earning a pittance and by switching to the best possible rates, they are at least reducing the effect of inflation on money that they need access to.”