The latest official inflation figures, released this morning, show that the Consumer Prices Index (CPI) rose to 1.9% in June – a sharp increase of 0.4% on May's figure, and the biggest rise in consumer prices since 2012.
However, despite the increase, it still marks the seventh consecutive month that inflation has remained at or below the Bank of England's 2.00% target. And there's still some good news for savers, as there are 72 savings accounts that will beat it!
If you want to get a measurable return for your money without inflation and the taxman taking a chunk, there are still a lot of options. In order to counter the effects, a basic rate taxpayer will need to find an account that pays at least 2.38% per annum (or 3.17% for a higher-rate tax payer).
Well, there are 72 of them across the ISA and non-ISA market that can do it, made up of 29 bonds and 43 cash ISAs.
It's an unfortunate fall on last month's total when there were 187 inflation-beating accounts on the market, but savers can take heart in the fact that things are getting better. A year ago, when inflation stood at 2.9%, there were no accounts whatsoever that could counter the effects, so although rates themselves have fallen since then we can still be safe in the knowledge that we'll be getting real returns on our money.
"Today, although savings rates are still dire, savers do at least have a few accounts they can choose from that will leave them with some form of return after tax and inflation pressures," commented Sylvia Waycot, editor of Moneyfacts.co.uk. However, unfortunately, the landscape still isn't recovering as quickly as we might have hoped.
In the long term the value of money is still being eroded (Moneyfacts' calculations show that £10,000 invested five years ago would have the spending power of just £8,714 today), while average rates across the market are a lot lower than they were this time last year. As Ms Waycot points out, "the average easy access account pays a miserable 0.64% as opposed to 0.70% last year, while the average interest paid across the ISA range is just 1.57% and a year ago it was 1.68%.
"But, the sad truth is that the savings market has not recovered from the Funding for Lending fiasco, which is why just before its introduction two years ago - even though inflation was at 2.4% - there were 278 ISA and non-ISA accounts that beat the taxman and inflation, a number we can only dream of these days."
It had been hoped that the arrival of the new ISA at the start of July would reinvigorate the savings market and deliver some much-needed returns, but unfortunately it doesn't yet seem to have had the desired impact. Nonetheless, getting a real rate of return is still possible, but you'll have to make a few sacrifices – in other words, you'll need to lock your money away if you want to achieve the 2.38% needed.
Fixed rate accounts are the only ones that offer a rate to counter the effects of inflation – the best easy-access ISA on the market pays 2.00% and its taxable equivalent offers just 1.40%, whereas a fixed rate ISA can generate an inflation-beating 2.85% if you're willing to tie your money up for five years.
Securing real returns may not be easy but beating inflation can be done, and there's still plenty of choice for savers looking to achieve that. Check out our pick of the top inflation-beating cash ISAs to get started in your search.
Find the best cash ISA
Inflation Beating Savings Accounts
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