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Savers can still beat inflation with a one-year fixed account

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22/05/2019
News of higher inflation will come as a blow to savers because fewer savings accounts pay an inflation-beating rate of interest.

Official data published today shows consumer price inflation (CPI) rose to 2.1 per cent in April, up from 1.9 per cent the previous month thanks to higher energy prices and air fares.

If savers want their money to grow in real terms, it needs to be in an account paying an interest rate above inflation.

According to Moneyfacts, when CPI was 1.9 per cent, 150 standard savings accounts beat or matched inflation. That figure has now fallen to 108.

But while savers have less choice, they can still beat inflation with savings accounts that are fixed for as little as one year. For an ISA, they’d need to lock their money away for at least five years.

Top inflation-beating accounts

Several-short term accounts match or beat inflation, and most are available from more unfamiliar brands, such as Islamic banks (Read our guide to sharia savings accounts).

Islamic bank BLME pays an expected rate of 2.2 per cent on its one-year bond or 2.3 per cent on its 18-month bond.

Another Islamic bank, QIB, also pays 2.1 per cent on its 18-month product, but only if it is set up via the Raisin UK Savings Marketplace.

BLME is also paying 2.4 per cent on its two-year bond, while QIB (through Raisin) is offering 2.25 per cent.

Elsewhere, Nigerian bank Zenith pays 2.2 per cent on its two-year bond, while RCI Bank, a French bank that is covered by the Financial Services Compensation Scheme (FSCS) offers 2.11 per cent.

Savers prepared to tie their money away for five years can get as much as 2.7 per cent from BLME.

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