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187 savings accounts now beat inflation!

187 savings accounts now beat inflation!

Category: Savings

Updated: 17/06/2014
First Published: 17/06/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The latest official inflation figures, released this morning, show that the Consumer Prices Index (CPI) fell to 1.5% in May – a drop of 0.3% on April's figure and reaching the lowest level since October 2009.

It marks the sixth consecutive month that inflation has remained at or below the Bank of England's 2.00% target, but this underperformance is good news for savers – there are now an impressive 187 savings accounts that will beat it!

There are now a lot more options if you want to get a measurable return for your money without inflation and the taxman taking a chunk. In order to counter the effects, a basic rate taxpayer will need to find an account that pays at least 1.88% per annum (2.50% for a higher-rate tax payer).

Well, there are 187 of them available across the ISA and non-ISA market that can do it, made up of 72 bonds and 115 cash ISAs. It's an impressive increase of 93 on last month's total, practically doubling the 94 inflation-beating account figure, and a fantastic improvement on this time last year when inflation stood at 2.7% and no accounts whatsoever could beat it – savers at the time would need an account paying at least 3.38% to get a real rate of return, which proved to be impossible.

However, it's not all good news, as 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 £8,715 today), while average rates across the market are a lot lower than they were this time last year.

It's hoped that the arrival of the new ISA in July will reinvigorate the savings market and deliver some much-needed returns, because as Sylvia Waycot, editor of Moneyfacts.co.uk, comments: "The imminent arrival of the super ISA means that we will all be able to legally stash more money away from the taxman this July, but the euphoria will be short lived if the accounts pay so little the taxman hardly notices."

Getting a real rate of return may not be that easy, particularly if you want access to your cash, but if you're wiling to lock your money away you could well achieve the 1.88% needed to generate a measurable return.

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 1.65%, whereas a fixed rate ISA can generate an inflation-beating 2.75% if you tie your money up for five years, or even 3.52% for a fixed rate seven-year bond.

Beating inflation can be done, and happily there's now a lot more choice for savers seeking meaningful returns. Given that ISA changes are imminent it could lead to even better news… we can only hope!

What Next?

Check out our inflation beating savings account page

Find the best savings rates with our best buys or savings search

Find a home for your 2014-15 cash ISA allowance

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.