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94 savings accounts now beat inflation

94 savings accounts now beat inflation

Category: Savings

Updated: 20/05/2014
First Published: 20/05/2014

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 It is now over 6 months old so the content may be out of date.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) rose to 1.8% in April after six months of falls – up 0.2% on March's figure.

However, despite this rise, there's still some good news for savers – not only does it mark the fourth consecutive month of inflation remaining below the Bank of England's 2.00% target, there are still 94 savings accounts that will beat it to give a measurable return for your money.

In order to counter the effects of tax and inflation, a basic rate taxpayer will need to find an account that pays at least 2.25% per annum (3.00% for a higher-rate tax payer). Well, there are 94 of them available across the ISA and non-ISA market, made up of 37 bonds and 57 cash ISAs.

This is an unfortunate drop of 65 on last month's total when there were 159 accounts that could beat inflation, but nonetheless it's still an improvement on this time last year when just six accounts – five of them cash ISAs – could do the same, when inflation was at 2.4% and savers would need an account paying 3.00% before getting a real rate of return.

It does however mark the first time in 10 months that inflation has actually risen, with this surprising increase being driven by higher transport costs. It means that 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 £8,716 today) and unfortunately means that savers have far fewer options, as Sylvia Waycot, editor of Moneyfacts.co.uk, comments:

"It will affect choice for savers as it will restrict the number of accounts that now beat inflation. Not only have interest rates fallen but the choice for savers has also shrunk, falling from 861 accounts a year ago to 830 today, with less than 100 of them able to beat or match inflation."

There are ways to do it, but you'll need to be willing to lock your money away – fixed rate accounts are the only ones that offer a rate that will counter inflation, with the best easy-access ISA on the market paying 2.00% and its taxable equivalent offering just 1.50%.

However, if you can tie your money up you could well achieve the 2.25% needed to generate a measurable return, and opting for an ISA would still be your best bet. As Ms. Waycot points out: "We are in the early part of a new tax year and savers should look to use up all of this year's ISA allowance. That way, at least they don't have to share their returns with the taxman."

What next?

Find an inflation-beating savings account

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.