News
Savers should switch accounts to beat inflation
Savers are being urged to be more proactive when it comes to finding the best interest rates for their pots as high inflation will continue to chip away at the money.
The Bank of England’s announcement today that the consumer price index has remained at 2.7%, means that savers will need to move their money into accounts which will help limit the impact of inflation on their money.
According to comparison site MoneySupermarket, to beat inflation a basic rate taxpayer needs a savings account that will pay at least 3.39% to gain enough benefit in real terms from their savings.
A higher rate taxpayer will need an account that pays at least 4.51% to make an impact and a 50p taxpayer needs an account that 5.41%.
Kevin Mountford, head of banking at MoneySupermarket.com, said: “The high cost of living has had a major impact on UK household budgets, and today’s news that inflation remains at 2.7%, will be unwelcome news for savers, especially in light of the low number of savings options available that beat inflation.”
MoneySupermarket says there are currently no easy access accounts that beat the effects of inflation while 13 easy access ISAs and one fixed rate ISA that beat inflation.
However, with the current average savings rate currently at 0.26%, the majority of savers can still switch to much better deals and reduce the impact of inflation.
Mountford added: “It is important savers don’t give up though, or get put off, and prepare to switch if they are not currently on the most competitive deal.
With the majority of savings sitting in accounts paying a derisory rate of interest, most savers will still benefit from switching to market leading deals, even if the rates on offer don’t beat the eroding effect of inflation.
“Limiting the impact of inflation is vitally important at a time when you will struggle to find accounts that beat it, especially if you cannot lock money away for the longer term or have already utilised your tax free allowance.
“It is also important to check your rate if you signed up to an account offering a bonus rate, as there are many deals coming to an end shortly, meaning you could be left on a very uncompetitive rate.”
Savers are also being urged to start thinking of using available products to help their money grow. Cash ISAs, offsetting savings against mortgage borrowing or peer-to-peer lending are some options to get the most out of savings pots.
| Cash ISAs | ||||
| Providor | Account (T&Cs apply) | Minimum Deposit | AER | Notes |
| Coventry BS | 60 day notice ISA | 1% | 3.10% includes 0.60% bonus for 12 months |
Withdrawals subject to 60 days notice |
| First Trust Bank | Cash ISA | £50 | 3.10% | na |
| Newcastle BS | Big Home Saver | £1 | 3.02% | For those saving to buy a home |
| Stafford Railway BS | Cash ISA | £1 | 3% | na |
| First Direct | Cash ISA | £1 | 3% | For 1st Account holders only |
| Vernon BS | Regular Saver ISA | £25 | 3% | Local restrictions apply |
| Beverly BS | Cash ISA | £500 | 3% | Withdrawals subject to 30 days notice Existing customers only |
| Newbury BS | 90 day Cash ISA | £20,000 | 2.85% | Withdrawals subject to 90 days notice |
| HSBC | Cash e-ISA | £1 | 2.75% | Existing customers only |
| Marks and Spencer | Advantage cash ISA | £1 | 2.75% | na |
| Marsden BS | Direct cash ISA 30 | £4,000 | 2.75% | Wiithdrawals subject to 30 days notice |
| Marsden BS | Members Reward ISA (Issue 1) | £10,000 | 2.75% | Existing customers of at least 5 years only |
| source: moneysupermarket.com |
