What Savings Account Can Now Beat Inflation? | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 20/01/2021

Today’s Consumer Price Index (CPI) figures reveal that inflation rose to 0.6% during December, an increase from 0.3% the previous month.

As a result of the rise in inflation, our research has found that there are now 214 standard savings accounts that can now match or beat inflation. Of these, 144 are fixed rate bonds, 51 are fixed rate ISAs, 13 are notice accounts, three are easy access accounts, and three are variable rate ISAs*.

Savers considering a fixed rate bond or ISA should keep in mind that the predicted rate for inflation during the final three months of 2021 is 2.1% and there are no savings accounts that can currently match or beat this rate. As such, if inflation rises as predicted, those locking into a fixed term account could find that their savings are eroded by inflation.

As fixed savings accounts rates remain low, many savers are turning to easy access accounts as an alternative option. The benefit of an easy access savings account is that it allows more flexibility than a fixed account and savers can access the funds within the account. Currently the top rate in the easy access chart can match today’s inflation rate, offering 0.60% AER, but savers should be aware that rates on these accounts can change at any time. As well as this, over the past year easy access accounts have seen a significant fall in rates and with the continued economic uncertainty and historic low Bank of England base rate, rates could fall further. As Rachel Springall, finance expert at Moneyfacts.co.uk, explained: “One of the most flexible savings vehicles is easy access accounts but they have been hit hard by rate cuts. Indeed, over the past 12 months the top deal has fallen by more than half, down from 1.40% to 0.60% – on a savings pot of £20,000 that’s a loss of interest of £160 over one year. As the economic outlook remains unpredictable and base rate keeps at a historic low, it would not be too unsurprising to see further cuts as providers adjust their market position in response to an influx of cash into sought-after deals.”

Although the savings market remains challenging, banks are still launching new chart-topping rates and savers should regularly check the savings charts to keep up-to-date with the best rates available. Springall added: “Despite the uncertain state of the market, it appears challenger banks and Islamic banks continue to take a firm place within the top rate tables, so any savers looking to acquire the best possible return would be wise to consider these less familiar brands. However, a word of caution to savers weighing up their options, the savings market remains erratic and a good deal doesn’t last long on the shelf, so quickness is key.”


*Based on a £10,000 deposit


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