Cash savings are at increased risk of having their value eroded by inflation, but research shows that millions of Brits are still keeping their hard-earned savings in low-interest accounts.
The rate of UK inflation slowed to 2.5% in December, according to the latest Consumer Price Index (CPI) reading from the Office for National Statistics (ONS). While the easing of inflation is good news for consumers, prices are still rising.
UK inflation reached its highest level since March in November, at 2.6%, which posed a headache for policymakers and savers alike.
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Putting your money into a savings account should be the safest means of protecting your money for the long term. However, high levels of inflation eat into the value of your savings account over time, so choosing the best savings account possible is essential.
At a minimum, the interest rate on your savings needs to be higher than the rate of inflation, and based on the latest figures and research from Moneyfactscompare.co.uk, 1,597 inflation-beating savings accounts are currently available.
“To avoid disappointment, savers would be wise to secure any enticing deals before they disappear,” Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said. “If consumers are unsure which account is best suited to their needs, they should seek independent advice in the first instance and carefully consider any opening restrictions.”
The total number of inflation-beating savings accounts includes 216 easy access accounts, 181 notice accounts, 192 variable rate ISAs, 313 fixed rate ISAs and 695 fixed rate bonds.
The good news for savers is that there are more inflation-beating savings accounts available this January than in the two prior. In January 2024, there were 967 deals that could beat the December 2023 CPI of 4.0%. There were no inflation-beating savings deals in January 2022, when the inflation reading was 10.5% (December 2022 CPI).
Are you making the most of your savings?
Millions of Brits are missing out on thousands of pounds in extra income by keeping their savings in a low- or no-interest account, according to data from Yorkshire Building Society (YBS).
The research, published in December, found £360 billion of savings is sitting in accounts paying returns of 1% or less.
Some 13 million people have more than £5,001 in a current account, earning no or minimal interest, YBS said.
The average balance in these accounts stands at £26,600.
Putting this average sum into, for example, an easy-access savings account paying 4% interest would yield £1,064 over a year.
“Despite the attention savings interest rates continue to have, it’s surprising that there continues to be such large pockets of people who are missing out on savings interest which in turn could have easily covered the cost of the festive period for many,” said Chris Irwin, director of savings at Yorkshire Building Society.
Which are the best savings accounts to beat inflation?
According to Moneyfactscompare.co.uk, these are the best savings accounts that are currently available, paying inflation-beating levels of interest.
| Account type | Top savings deals at £10,000 gross - today |
|---|---|
| Easy access account | Chase – 4.89% |
| Notice account | BLME – 4.85% (90-day) |
| One-year fixed rate bond | Vida Savings – 4.77% |
| Two-year fixed rate bond | Atom Bank – 4.70% |
| Three-year fixed rate bond | SmartSave– 4.62% |
| Four-year fixed rate bond | UBL UK – 4.54% (payable on maturity) |
| Five-year fixed rate bond | SmartSave – 4.78% |
Top rates exclude deals with restrictive criteria. Notice accounts exclude those over 180 days Source: Moneyfactscompare.co.uk
Which are the best ISAs to beat inflation?
Cash ISAs are another option for investors who want to protect their savings both from inflation and from the taxman.
Moneyfactscompare.co.uk has identified the following cash ISAs that offer inflation-beating interest on cash savings:
| ISA type | Top savings deals at £10,000 gross - today |
|---|---|
| Easy access ISA | Moneybox – 5.00% |
| Notice ISA | Tipton & Coseley – 4.65% (60-day) |
| One-year fixed rate ISA | United Trust Bank – 4.54% |
| Two-year fixed rate ISA | Castle Trust Bank – 4.43% |
| Three-year fixed rate ISA | UBL UK – 4.56% (payable on maturity) |
| Four-year fixed rate ISA | UBL UK – 4.30% (payable on maturity) |
| Five-year fixed rate ISA | UBL UK – 4.54% (payable on maturity) |
Inflation announcement dates. Top rates exclude deals with restrictive criteria. Notice ISAs exclude those over 180 days. Source: Moneyfactscompare.co.uk
“In the run-up to ISA season, cash ISAs have seen rate increases across the board, with the top four-year fixed ISA being the exception. It would be wise to assume that competition in this area could increase in the coming months as the new tax-year approaches,” says Eastell.
“Savers who have not yet made the most out of their tax-free savings would be sensible to ensure that they use any remaining balances, otherwise they may lose out.
“Easy access ISAs pay as much as 5%, which is positive news for those looking to maximise their returns in the short-term. However, savers could feel locking away their cash may become a more appealing option especially as there are expectations for the Bank of England to reduce interest rates.”
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