How inflation shrinks your savings, and what to do about it

It’s getting harder and harder to grow your money in real terms. Alex Rankine looks at the best savings accounts currently on offer.

It’s getting more difficult to protect the value of cash savings against inflation. UK annual consumer price index (CPI) inflation spiked to 1.5% in April, with the Bank of England forecasting that it will hit 2.5% by the end of this year. Interest rates are not keeping up. The average easy-access savings account pays 0.16% , compared with 0.4% a year ago.

Banks have little incentive to raise rates. Thanks to lockdowns the average UK household has now amassed £4,353 in “excess savings” (extra money saved in addition to normal saving), according to Investec. The banks are swimming in cash. Britain’s “big four” lenders (Barclays, HSBC, Lloyds Banking Group and NatWest) collectively took in more than £200bn in new deposits last year.

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.