Best inflation-beating savings accounts to make your money work hard

Billions of pounds are being eroded by inflation as savings are left languishing in accounts paying low interest rates.

UK inflation was 3.8% in September, the same level it was in July and August, as analysts expect inflation to have reached its near-term peak.

But 3.8% inflation still remains almost double the Bank of England’s 2% target, and above interest rates offered by many of the UK’s leading banks.

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The average interest rate for a savings account on 22 September was 3.44%, 0.36 percentage points below the latest inflation reading, according to money comparison website Moneyfacts.

As average savings rates are lower than inflation, consumers holding money in these accounts are seeing their cash savings lose purchasing power as prices increase faster than interest payments.

Finding a savings account with an interest rate higher than the rate of inflation helps make sure you are not losing money in real terms.

There are currently 978 savings accounts that beat inflation on the market right now, made up of 75 easy-access accounts, 89 notice accounts, 56 variable rate cash ISAs, 216 fixed rate cash ISAs, and 542 fixed rate savings accounts, according to Moneyfacts.

This is significantly less than the 1,731 accounts that beat inflation in October 2024, when inflation was just 2.3%.

The top easy-access savings account on the market right now is Zopa’s Smart Saver. The account offers 4.75% interest for the first 12 months, but the rate reduces to just 3.31% thereafter.

To gain access to the savings account, you must hold a Zopa Biscuit current account with £500 being paid into it a month.

Caitlyn Eastell, spokesperson at Moneyfacts, said: “Even the most competitive savings rates are struggling to outpace inflation, with less than half able to keep ahead of rising prices.

“Although some of the best rates have risen over the past month, it’s a short reprieve, as over the past year the vast majority have fallen, which means savers who re-invested £10,000 could now be almost £100 worse off.

“With the number of inflation-beating deals wavering, any saver who finds their account falling behind inflation, should immediately switch to a more attractive deal, or consider locking into a fixed bond to secure guaranteed returns on their hard-earned cash.”

With the risk of inflation eroding your savings becoming increasingly likely, it could be a good time to review your interest rates and make sure your savings are working as hard as possible.

Which are the best savings accounts to beat inflation?

Best easy-access savings accounts

Best easy-access cash ISAs

Best one-year fixed savings accounts

Best one-year fixed cash ISAs