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This morning the ONS announced that inflation fell to 2.4% in September, down from 2.7% in August and returning to the level last seen in June. Not only does this mean that the cost of living has edged down – which will hopefully feed through into our wallets – but also that more savings accounts are now able to beat it!
In order to achieve real returns on our savings – i.e. to ensure that the interest we receive isn't eroded by inflation – we need to have a savings rate that's at least equal to the current rate of inflation, and luckily, our data shows that the number of such deals is on the rise: there are now 20 fixed rate bonds (based on a £10,000 deposit) that can match or beat inflation, and within that, 15 deals pay more than 2.40%, which means you're getting a measurable return from your cash.
While this is still a small share of the standard savings market, the improvement is welcome – last month, there were just four accounts that could match or beat the then-current inflation rate of 2.7%, so the fact that this figure has increased fivefold is certainly positive news. But there's still more to be done before the bulk of the savings market can offer a real return, as Rachel Springall, finance expert at Moneyfacts.co.uk, highlights:
"Despite the positive boom in savings rate rises, rates in general are failing to outpace the rate of inflation, which is currently eroding a large portion of the standard savings market. Inflation will need to fall sharply for savers to feel a real return, otherwise the spending power of their cash will continue to weaken.
"As it stands, even the top Moneyfacts.co.uk Best Buy easy access account paying 1.50% from Marcus by Goldman Sachs® would easily be eroded by inflation if it remains at its current level or rises further. The only deals around that beat 2.4% today are fixed rate bonds, where savers would need to lock their cash away for four years or more, which might not be a commitment savers can make."
Use our savings search tool to find a rate, and term, that meets your needs
Inflation may still be taking its toll on much of the savings market, but if you're willing to lock your money away, you've now got far more ways to beat it – and that's not the only way to beat inflation, either.
When we highlight the number of inflation-beating deals, we're referring to the standard savings account sphere, but there are other ways to go about it; you just need to look to non-standard solutions.
High interest current accounts. High interest current accounts are arguably one of the best ways to secure a decent return on your savings without putting them at risk on the stock market, with rates of up to 5% possible – more than double the current rate of inflation. The caveats tend to be that the headline rate is normally only applicable on balances up to a certain amount, and there'll usually be some monthly funding requirements, but if you've got a relatively small savings pot and can meet the criteria, they could be your inflation-beating saviours.
Regular savings accounts. Again, you'll usually come up against several restrictions with regular savings accounts – namely that you have to commit to saving a certain amount each month, and deposit limits will normally be fairly low – but you could still achieve an inflation-beating return of up to 3.50%, or even more if you've got a loyalty account with your current account provider.
Stocks & shares ISAs. This is where the investment risk comes in, but if you're comfortable with a bit of risk for the potential of far better returns than can be achieved in the cash savings market, it could be time to consider stocks & shares ISAs. Just remember that returns aren't guaranteed and that investments can fall as well as rise, and if you're unsure, always seek advice.
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. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.