The rate of UK inflation rose to 3% in January, the highest level in 10 months. This puts it ahead of the average easy-access cash savings rate, which is currently 2.85%, according to financial information company Moneyfacts. In other words, the average saver is now losing money in real terms.
The good news is that savvy savers can still find inflation-busting deals by shopping around. The best easy-access savings accounts currently pay up to 4.75%, as of 20 February, while the best one-year fixed-rate accounts offer up to 4.52%.
Those looking to shield their savings income from the taxman can find even better deals as the end of the tax year approaches. The best easy-access cash ISA currently pays 5.03%, while the best one-year fixed ISA pays 4.46%.
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The latest data from Moneyfacts shows there are currently 1,516 savings accounts that beat inflation overall, including 164 easy-access accounts, 173 notice accounts, 168 variable-rate ISAs, 320 fixed-rate ISAs and 691 fixed-rate bonds.
Are you making the most of your savings?
We lived through an ultra-low interest rate environment for more than a decade after the 2008 financial crisis, but higher rates have been back on offer over the past couple of years after the Bank of England raised the base rate in a bid to tackle inflation.
Millions of savers have been missing out, though, either by failing to review the rate on their savings account or keeping the majority of their savings in a current account. Many current accounts pay low or no interest.
Figures published by Yorkshire Building Society (YBS) in 2024 suggest there is more than £360 billion sitting in UK current and savings accounts earning 1% or less. The building society also found almost 13 million current accounts with a balance of over £5,000. The average balance on these accounts stood at £23,600.
Separate research from the Building Societies Association, also published last year, suggests more than a quarter of UK adults could be holding most of their savings in a current account.
With inflation on the rise again (and interest rates now on a downward trajectory), the issue is becoming more pressing. The Bank of England has indicated inflation could hit 3.7% later this year, but economists are still expecting around three more base rate cuts before the year is out. Savings rates are likely to tumble further each time a cut is announced.
“With market-leading rates falling across the board, earning a fair return may become a pressing issue, so it is key that savers review their current rate and make the switch if it is not working to its fullest potential,” said Caitlyn Eastell, a Moneyfacts spokesperson.
By moving a £5,000 balance into a 4% savings account (and out of a no or low-rate current account), you could earn £200 in interest per year. By moving a £20,000 balance into the same account, you could earn £800 per year.
Which are the best savings accounts to beat inflation?
Account | Rate (AER) | Access notes / bonus rate |
Cahoot Sunny Day Saver | 4.75% | Rate only paid on balances up to £3,000. |
Principality Building Society Online Bonus Triple Access | 4.70% | Includes a 1.50% bonus for 12 months. Up to three withdrawals per year including account closure. |
Coventry Building Society Five Access Saver | 4.66% | Up to five penalty-free withdrawals per year. Further withdrawals subject to a 50-day loss of interest. |
West Brom Building Society Four Access Saver | 4.65% | Lower rate paid if more than four withdrawals per annum. |
Atom Bank Instant Saver Reward | 4.60% | Lower rate paid if withdrawal made that month. |
Account | Rate (AER) | Access notes / bonus rate |
Trading 212 Cash ISA Promo Rate | 5.03% | Rate includes 0.13% bonus for 12 months. |
Principality Building Society Online Bonus Five Access Cash ISA | 4.70% | Rate includes a 1.55% bonus for 12 months. Up to five withdrawals per tax year. |
Chip Cash ISA | 4.67% | Rate includes a 0.68% bonus for six months. |
Charter Savings Bank Easy-Access Cash ISA | 4.55% | No restrictions. |
Coventry Building Society Six Access ISA | 4.55% | Up to six penalty-free withdrawals per annum. Further withdrawals subject to a 50-day loss of interest. |
Account | Rate (AER) |
Virgin Money One-Year Fixed-Rate E-Bond | 4.52% |
Progressive Building Society Online One-Year Fixed-Rate Flexible Bond | 4.50% |
Hampshire Trust Bank One-Year Online Fixed Saver | 4.45% |
Kent Reliance via Hargreaves Lansdown Active Savings – One-Year Fixed-Term Deposit | 4.44% |
Tandem Bank One-Year Fixed Saver | 4.40% |
Account | Rate |
OakNorth Bank Fixed-Rate Cash ISA | 4.46% |
Hampshire Trust Bank One-Year Online ISA Fixed Saver | 4.41% |
Zopa Smart ISA – One-Year Fixed-Term ISA | 4.40% |
Newcastle Building Society One-Year Fixed-Rate ISA | 4.20% |
Tesco Bank Fixed-Rate Cash ISA | 4.16% |
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