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.

Official figures show UK inflation rose to 3.8% in July, the highest level in 18 months, up from June’s figure of 3.6% and still high above the 2% target. Inflation stood at 3% in January 2025.

With inflation edging higher, many consumers’ savings accounts are failing to keep up.

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The average interest rate for a savings account is currently 3.47%, 0.23 percentage points lower than inflation, new analysis from Moneyfacts shows.

As average savings rates are lower than inflation, consumers holding money in these accounts are seeing their cash savings lose their purchasing power and decline in real terms.

Finding a savings account that lets your money grow faster than inflation is, therefore, vital to make sure you are not losing out. However, such accounts are becoming increasingly harder to find.

Fewer than half of available accounts on the savings market are paying above a rate of inflation, according to Moneyfacts.

Just 956 out of the total 2,004 savings accounts available allow your money to grow in real terms, down from 1,280 inflation-beating accounts on 23 July.

Caitlyn Eastell, spokesperson at Moneyfacts, said the declining number of inflation-beating accounts means “it is crucial savers review their current deal and if they are earning less than 3.8% to immediately search for a better deal”.

Thankfully, there are still some savings accounts out there that beat inflation. The best one-year fixed-rate accounts offer up to 4.43% interest, while the top easy-access savings accounts pay up to 4.84%.

Savers who not only want to make the most of above-inflation interest rates but also want to shield their savings income from the taxman can make the most of the best cash ISAs on the market right now, paying up to 4.7% interest for easy-access savings or 4.32% for a one year fix.

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?