Impossible task for savers as inflation rises once more

Inflation has continued to rise, making it an impossible task for cash savers to protect their cash from its eroding impact. Acquiring the best savings deal is crucial to soften its eroding impact and the latest analysis from Moneyfactscompare.co.uk reveals the top rate deals available to savers searching for a competitive return.

• The Consumer Price Index (CPI) rose to 6.2% during February, from 5.5% in January.
• The number of deals able to outpace inflation has not changed since last month. There is not one standard savings account that can outpace 6.2%*.
• The predicted rate for inflation during Q1 2023 is 5.2%.
• In March 2021, 326 deals (seven easy access accounts, 23 notice accounts, eight variable rate ISAs, 78 fixed rate ISAs and 210 fixed rate bonds) could beat 0.4% (February 2021 CPI) and in March 2020, 26 deals (all fixed rate bonds) could beat 1.7% (February 2020 CPI)*.

Inflation stood at 0.4% a year ago and the number of savings accounts which could outpace its eroding impact were plentiful. However, the top deals today can either match or beat the market-leading deals seen this time a year ago, which is a positive direction for the savings market, but sadly rising inflation is taking its toll and not one standard savings account can beat it today. The Bank of England predicts inflation will be beyond the 2% target for some time yet, but even if inflation fell to 2%, there are few options for savers to choose from to outpace this rate.

The base rate rises we have seen since December 2021 can have a positive impact on the savings market, but not every saver will have benefited from this movement. At present it is the challenger banks and building societies who are competing in the cash savings sector, with notable improvements to the easy access sector in recent weeks. However, as the biggest high-street banks fail to pass on the full rises to their customers, and some pay as low as 0.01% in interest, it would be sensible for savers to ditch and switch.

Beyond expectations savers will have noticed a much-desired ISA season start to blossom, so if they have yet to utilise their ISA allowance, now is a good time to compare deals with just two weeks to go until the new tax year. However, savers will notice a rate difference between fixed bonds and ISAs, so they need to be conscious of any Personal Savings Allowance (PSA) they have as well as their ISA allowance. Easy access ISAs are seeing a spate of improvement, but not every top rate will accept transfers in and not every account will permit unlimited withdrawals, so this may not suit every saver looking for flexibility. As the top rate deals remain volatile, it would be a good idea for savers to take some pressure off themselves by signing up to rate alerts and newsletters to keep them in the know.

*Data note: Please note that these savings product numbers only include deals that are available to UK residents (easy access, notice, fixed rate bonds, variable or fixed ISAs) and exclude regular savers and children’s savers (this figure does not count each interest payment option for each account), based on a £10,000 deposit. Higher rates may be available for other levels of deposit.