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Less than half of savings accounts beat inflation

Less than half of savings accounts beat inflation

Category: Savings

Updated: 18/10/2016
First Published: 18/10/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Official figures show that inflation jumped up during September, with the Consumer Prices Index (CPI) rising to 1%, up from 0.6% in August and the biggest monthly rise in more than two years. Not only does this mean that consumers may begin to feel the impact on their wallets, but there are now far fewer savings accounts that will beat inflation – and thanks to continued rate cuts, there's even less to look forward to.

Cuts keep coming

Our data shows that less than half (266) of the 644 savings accounts currently on the market can beat or match inflation, and of these 250 (12 no notice accounts, 18 notice deals, 152 fixed rate bonds and 68 cash ISAs) are without restrictive criteria – which means the typical saver has just 12 inflation-beating deals to choose from if they want easy access to their cash.

Even those deals may not be around for long, with the rate-cutting frenzy continuing. Indeed, rate reductions in the savings market have now outweighed rate rises for 12 consecutive months, and there's no end in sight: we recorded just 29 savings rate rises during September, while rate reductions over the same period totalled 164 – which translates to around six cuts to every rate rise – with some deals falling by as much as 0.75%.

The silver lining is that the total number of cuts made during September was less than half that seen during August (a devastating 388 cuts were made in total during that month, most of them coinciding with the base rate announcement), but as Moneyfacts' Rachel Springall says, there's little to look forward to as the cuts just keep coming.

"Savers will be hoping for some stability in the market, but this is unlikely to come to fruition any time soon, particularly as some providers have left time between announcing cuts to their accounts and implementing them to give savers enough notice," she said. "This means that more cuts are expected during October, and if competition continues to drift we could see a substantial number of further cuts made between now and the end of 2016.

"Inflation rising to a 22-month high will also be playing on the minds of many consumers, as there will be very few accounts paying 1% or more. Some may pin their hopes on the Autumn Statement to provide some good news, but so far no initiatives have been divulged that could benefit struggling savers."

Lack of incentive

Quite simply, if you're looking for an account that can give a measurable return, it's now going to be a lot harder. It isn't only those seeking to lock away their money for the long term that'll be disappointed, either, as many short-term accounts – such as regular savers and one-year bonds – are also being hammered by cuts.

For example, the best fixed regular savers have been cut from 6% to 5% in recent weeks and the average one-year fixed bond has just fallen below 1% for the first time on record, to a poor 0.99%. And what about high interest current accounts? They may still be the saver's saviour for the time being, but even these are experiencing rate cuts. Accounts across the board are paying less than years gone by, so what can you do?

Act fast! As Rachel says, "savers shouldn't wait around too long to grab a best buy deal, as more cuts and withdrawals may well be on the way" – so if you spot a good deal, make sure to snap it up while you still can.

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.