Leanne Macardle

Leanne Macardle

Editor
Published: 20/03/2019

Figures released today from the Office for National Statistics (ONS) show that inflation edged up last month to 1.9% (up from 1.8%), but this shouldn't have too much of an impact on savers' spending power. Indeed, savers will actually find that they can get a better true return on their cash than if they had invested two years ago, just before inflation started rising above the Government's 2% target*, with there now being many more accounts on the market that can beat it.

The latest research from Moneyfacts.co.uk shows that 152 fixed rate bonds, 27 fixed rate ISAs and one notice account (based on a £10,000 deposit) can now match or beat inflation**, and within that, 142 fixed bonds and 20 fixed ISAs pay more than 1.9%. In February 2017, back when inflation was announced at 1.8%, there were only 23 fixed rate bonds that could outpace 1.8% and just 19 that could have outpaced today's inflation rate of 1.9%, highlighting the improvement in the market since then.

Savings market analysis

Top savings deals at £10k gross


14 Feb 2017


20 Mar 2018


Today


Easy access account


RCI Bank UK – 1.10%


ICICI Bank UK – 1.34%


Kent Reliance – 1.50%

Notice account


Secure Trust Bank – 1.19% (120 day)


Secure Trust Bank – 1.65% (180 day)

Charter Savings Bank – 1.90% (95 day)

One-year fixed bond


Atom Bank – 1.50%


Al Rayan Bank – 1.85%*


BLME – 2.20%***


Two-year fixed bond


Atom Bank – 1.65%


Ikano Bank – 2.10%


Gatehouse Bank – 2.45%***


Three-year fixed bond


Atom Bank – 1.75%


Vanquis Bank – 2.30%


AgriBank – 2.71%


Four-year fixed bond


Vanquis Bank – 1.96%


Vanquis Bank – 2.47%


Vanquis Bank – 2.52%


Five-year fixed bond


Secure Trust Bank – 2.06%


Vanquis Bank – 2.56%


AgriBank – 3.24%

***Islamic bank, pays an expected profit rate. Source: Moneyfacts.co.uk

"Savers may still celebrate today's level of inflation, despite a rise, as interest rate increases have resulted in more accounts that can offer a true return than two years ago," said Rachel Springall, finance expert at Moneyfacts.co.uk. "This means that the true spending power of their cash remains heightened, though it remains the case that the most popular vehicles for savers' cash – easy access accounts – fail to outpace its impact."

It seems that this is the price many consumers have to pay for keeping their cash accessible, but even here, rates are on the rise. Just last week we reported on the finding that the top easy access rates are edging up, and it seems that providers aren't shying away from competition, with Kent Reliance launching a brand new easy access deal just yesterday that pays the joint-top easy access rate (based on a £10,000 investment) of 1.50%, and it allows unlimited withdrawals too.

But as Rachel points out, "if savers are prepared to give some notice on withdrawing funds, they can get inflation-matching returns on a notice account. In fact, the top notice account rate from Charter Savings Bank pays 1.90% (with a 95-day notice period), which matches the level of inflation today.

"Fixed bonds remain the one area where savers can beat inflation across all terms by picking a Best Buy deal. Now, even one-year fixed bonds can offer inflation-beating returns, such as with BLME paying 2.20% as an expected profit rate. Conversely, back in February 2017 (when inflation was 1.8%), the top deal paid just 1.50%, available from Atom Bank."

This shows that to really get inflation-beating returns, it still pays to lock your cash away, but it could also pay to look beyond the mainstream. Challenger banks continue to offer most of the best savings rates and many have been tweaking their ranges in the past month to secure a prime position in the Best Buys, so savers may want to check out these more unfamiliar brands to find the top rates.

Above all, comparing deals is key, particularly now that there are far more inflation-busting deals out there. "Savers would also be wise to review any closed accounts and switch to ensure their money is working as hard as it can be," concluded Rachel, with the rates paid on closed accounts (those no longer accepting new business) typically far below the best rates currently available. Use our savings Best Buys to get started and see if you can find an account that offers inflation-beating returns – happily, it should now be far easier to do just that.

*Inflation was announced at 1.8% in February 2017 before rising to 2.3% the following month. Last month (February 2019) was the first time it had fallen below the Government's 2% target since then.

**Data note: Please note that these savings product numbers only include deals that are available to all UK residents (this figure does not count each interest payment option for each account), based on a £10,000 deposit.

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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