You are here: Home - Saving & Banking - News -

Starving savers: NO cash ISAs on the market beat inflation

Written by: Paloma Kubiak
None of the cash ISA products currently on the market pay an interest rate that can beat inflation, data from Moneyfacts reveals.  

UK inflation rose sharply from 1.2% in November to 1.6% in December on the back of rising food, fuel and air fares.

Rising inflation is an obstacle for savers as it means they have to earn more on their deposits to keep up with rising prices.

But savings rates have been on a steady decline and the average easy access account currently pays just 0.39%.

This is the first time since August 2013 that no cash ISA can beat inflation, according to campaign group Which?


Where can savers turn?

Moneyfacts said that there is one cash ISA on the market that can match inflation – Paragon Bank’s 5 year fixed rate cash ISA pay 1.60% AER.

There are also some savings accounts that can still beat inflation, but just a measly 7% of the total out there.

A handful of lesser-known providers have recently increased interest rates but only by a fraction: Atom Bank, Ikano Bank, Masthaven, and RCI Bank.

If you don’t need instance access to your cash, you can earn a top rate of 1.4% with the Atom Bank 1 Year Fixed Saver, or 1.6% if you fix for two years.

The best rate over three years is with Ikano Bank (1.75%), or you can boost your rate to 1.95% if you open the Ikano Bank 4 Year Fixed Saver.

However, as Ikano is a Swedish bank, your deposits aren’t covered by the UK’s Financial Services Compensation Scheme (FSCS). Instead, your money comes under the Swedish protection scheme. See’s Should I entrust foreign banks with my savings? for more information.

For those who can afford to put their money away for longer, Atom Bank pays 2.05% over five years.

What about current accounts?

Until recently, current accounts offered customers better savings rates than those offered by traditional savings products.

Here are the best deals currently available, though it’s best to check if you can hit the monthly deposit minimum:

Nationwide FlexDirect pays 5% on balances up to £2,500 in the first year, falling to 1% after 12 months (minimum deposit of £1,000 per month).

Santander 123 account pays 1.5% on balances up to £20,000, but comes with a £5 monthly fee (minimum deposit of £500 per month).

TSB Plus account pays 3% on balances up to £1,500 and 5% cashback on your first £100 of spending each month, using your contactless debit card, Apple Pay or Android Pay (minimum deposit of £500 per month).

Is now the time to take on more risk?

Given the record low interest rate environment, savers have been trying out peer to peer lending, which offers returns of up to 7%. See’s Tips to get you started in peer to peer lending.

Some savers may feel now is the time to move towards investing in stocks and shares. You don’t pay capital gains tax or income tax with a stocks and shares ISA. You can also transfer money from an existing cash ISA to a stocks and shares ISA without losing the tax benefits, and vice versa.

If you’re new to investing, it’s important to know about what protections are in place should the worst happen. Investment losses aren’t covered by the FSCS so your savings are at risk if the investments perform badly.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Seven ways to get help with energy bills this winter

We knew today’s announcement was going to be painful, but it’s still a shock to the system. When this kick...

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week