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 It is now over 6 months old so the content may be out of date.

Tim Leonard

Tim Leonard

Finance Expert
Published: 19/12/2018

Savers have been warned that there are no cash ISAs that currently offer an inflation-beating rate, despite the Consumer Prices Index (CPI) falling to 2.3% during November.

According to the latest research by Moneyfacts.co.uk, there are now 46 fixed rate bonds (based on a £10,000 deposit) that will at least maintain the purchasing power of savers' money, of which 40 can actually improve it.

As has been the case for most of the year, no variable or fixed rate ISAs can outpace inflation, despite the base rate rise in August and heightened competition among challenger banks during 2018.

Indeed, throughout 2018 only one non-fixed rate bond has managed to beat inflation, when United Bank UK paid 2.79% on its five-year fixed ISA in April at a time when inflation stood at 2.5%.

"The fact that ISAs have fallen behind inflation for much of the year will be disappointing news for savers," said Rachel Springall, Finance Expert at Moneyfacts.co.uk. "As it stands, savers will still find some non-ISA accounts beating the effects of inflation, but not many, and most of these are fixed rate bonds over a longer term. Consumers may not be prepared to lock away savings for more than a year due to economic uncertainties, as they may miss out on future rate rises."

While their tax-free status used to mean ISAs were the first port of call for the vast majority of savers, their appeal has diminished since the introduction of the Personal Savings Allowance in April 2016, which means basic rate taxpayers can now earn £1,000 in savings interest before having to pay tax (£500 for higher rate taxpayers).

"Moving into 2019, it is anticipated that interest rates will continue to rise, so it is hoped that more savings vehicles will rise above the challenge to beat inflation," said Rachel. "Even so, savers would be wise to seek out the Best Buys to ensure they are getting the best possible return on their funds, and to apply quickly, as the best deals may not be around forever."

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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 Any products featured may be withdrawn by their provider or changed at any time.

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