Derin Clark

Derin Clark

Online Reporter
Published: 18/09/2019

With CPI (Consumer Price Index) figures released today showing that inflation during August has fallen to 1.7%, eight in 10 (81%) cash savings accounts fail to beat inflation, research from Moneyfacts.co.uk shows.

The research shows that for savers to beat today’s inflation rate, they have to lock their money away for over a year. Just 176 fixed rate bonds and 31 fixed rate ISA (based on a £10,000 deposit) can now match or beat inflation*. Within that, 163 fixed bonds and 20 fixed ISA pay more than 1.7%.

While savers might be disappointed to have so few inflation-beating account options, it is a huge improvement to a year ago when in September 2018 just two deals, both fixed rate bonds, could beat the then inflation rate of 2.7% (August CPI). In addition to this, two years ago in September 2017 no standard savings account could outpace the 2.9% (August CPI) inflation rate at the time. In January 2019, 82 fixed rate bonds and four fixed rate ISAs could beat the 2.10% (December 2018) inflation rate. However, with the current economic uncertainty and the base rate announcement due tomorrow, the next few months could prove to be a gloomy time for savers.

Savings market analysis 

Top savings deals at £10,000 gross 12 Sept 2017 19 Sept 2018 Today
Easy access account Ulster Bank - 1.25% Yorkshire BS - 1.41% Al Rayan Bank – 1.60%**
Notice account Secure Trust Bank - 1.64% (180-day) PCF Bank - 1.85% (180-day) PCF Bank – 1.85% (180-day)
One year fixed rate bond Al Rayan Bank - 1.90%** BLME – 2.05%** BLME – 2.10%**
Two year fixed rate bond Al Rayan Bank - 2.20%** Bank and Clients – 2.25% BLME – 2.35%**
Three year fixed rate bond Al Rayan Bank - 2.30%**  Charter Savings Bank – 2.41% BLME – 2.45%**
Four year fixed rate bond Secure Trust Bank - 2.31% Masthaven Bank – 2.53% BLME – 2.25%**
Five year fixed rate bond Secure Trust Bank - 2.51% Charter Savings Bank – 2.70% Gatehouse Bank – 2.45%**

**Islamic bank, pays an expected profit rate.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The savings landscape is changing, and not for the better, as savers will find that a vast majority of savings accounts are being eroded by the power of inflation. There are no easy access accounts that can beat 1.7% today, so savers will need to tie their money down to outpace inflation.

“If we were to roll back to January of this year, there were 82 fixed rate bonds and four fixed rate ISAs that could beat 2.10%, the then level of inflation (December 2018). If we go further back, to a year ago – inflation was announced at 2.70% (August 2018) – only two fixed rate bonds could outpace this rate, which represented less than a 1% share of the standard savings market.

“Savers may not want to tie up their cash right now due to economic uncertainties, and findings from the Bank of England show a great disparity between the flow of money going into interest-bearing time deposits (fixed rates or those where savers must give notice to withdraw funds) compared to those that do not require the saver to give notice. Indeed, between January and July 2019, £2.2bn went into interest-bearing time deposits compared to £17.1bn for interest-bearing sight deposits (easy access accounts etc).

“Those consumers who would prefer to keep their cash close at hand within an easy access account would be wise to chase down the top rates due to some of these being reduced in recent weeks. With this in mind, it is more important than ever to keep on top of the changing savings market.”

 

*Data note: Please note that these savings product numbers only include deals that are available to all UK residents (no notice, notice, fixed rate bonds, variable or fixed ISAs) and excludes 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 larger deposits.

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.

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