Leanne Macardle

Leanne Macardle

Editor
Published: 08/05/2019

Statistics released today show that inflation remained at 1.9% in March, which is good news for savers, as it means that they can get a better true return on their cash than if they had invested two years ago – or even just 12 months ago – as the number of savings deals that can beat inflation is increasing.

Savings boost

As inflation remains below the Government target of 2%, the latest research from Moneyfacts.co.uk shows that it also remains lower than the level seen in both April 2017, when the Consumer Prices Index (CPI) for March was announced at 2.3%, and April 2018 when inflation was 2.5%. Better still, savings rates have risen over both time periods, as the table below highlights.

Savings market analysis

Top savings deals at £10,000 gross


17 April 2017


19 April 2018


Today


Easy access account


Yorkshire BS – 1.15%


RCI Bank UK – 1.30%


Kent Reliance – 1.50%


Notice account


Secure Trust Bank – 1.34% (120 day)


Secure Trust Bank – 1.65% (180 day)

Charter Savings Bank – 1.90% (95 day)


One-year fixed bond


Ikano Bank – 1.50%


Al Rayan Bank – 1.85%**


BLME – 2.20%**


Two-year fixed bond


OakNorth – 1.71%


Wyelands Bank – 2.15%


Al Rayan Bank – 2.40%**


Three-year fixed bond


Secure Trust Bank – 2.00%


RCI Bank UK – 2.31%


Gatehouse Bank – 2.55%**


Four-year fixed bond


Secure Trust Bank – 2.10%


Vanquis Bank – 2.47%


BLME – 2.50%**


Five-year fixed bond


Ikano Bank – 2.30%


United Trust Bank – 2.79%


Gatehouse Bank – 2.75%**

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

The current level of inflation also means that 161 fixed rate bonds, 27 fixed rate ISAs
and one notice account (based on a £10,000 deposit) can now match or beat it*, and within that, 152 fixed bonds and 21 fixed ISAs pay more than 1.9%. This is in sharp contrast to recent years – in April 2017, there were no standard savings accounts that could outpace the then-inflation rate of 2.3% and in April 2018 just 10 deals could beat 2.5%, with today's figures highlighting a clear improvement.

This all means that savers can now comfortably beat inflation, though they'll need to tie up their cash to do so, as not one of these inflation-beating products allows savers instant access to their funds. However, this could be a small price to pay for real returns, so the overall picture is still positive – particularly considering how much rates have risen over the years.

Get real returns on your cash

"Savers may be pleased to find that inflation has remained at a level where they can beat its effects when it comes to their savings deposits, but they will still need to lock in their funds to avoid its eroding power," said Rachel Springall, finance expert at Moneyfacts.co.uk.

"Despite that, the proportion of the savings market that can beat its effects has grown in comparison to a year ago – when there were only 10 standard savings accounts that could outpace its impact – which means many more savers would have lost money in real terms."

Indeed, it's now possible to find accounts paying over 1.9% in the one-year bond market, meaning savers can get an inflation-beating return without needing to lock their money away for too long. For example, BLME pays an expected profit rate of 2.20% – far more than the best deal available a year ago from Al Rayan Bank, which paid expected profit of 1.85% – and two years ago, savers would have needed to fix for at least three years to earn a rate of 2% with Secure Trust Bank.

This also highlights the importance of considering accounts from the more unfamiliar brands, as they typically provide market-leading returns; both Islamic banks and challenger banks regularly top the Best Buy charts, so it could pay to opt for a lesser known name. After all, loyalty really doesn't pay.

"Although no easy access accounts can currently outpace the rate of inflation, these rates are also on the rise, with a mix of activity timed perfectly for savers who want quick access to their cash in case of emergencies," said Rachel. "Savers can now get a top rate of 1.50% from a challenger bank, which is 10 times higher than the Flexible Saver on offer from HSBC paying just 0.15%, while the best easy access account last year paid 1.30% from RCI Bank UK (though this deal has since had its rate increased to 1.42%).

"Clearly it is important that consumers look past the high street brands if they are looking for a top rate on an easy access deal, but also for fixed rates too. It remains the case that the challengers are the institutions working hardest to entice savers' deposits, so they shouldn't be overlooked."

*Data note: Please note that these savings product numbers only include deals that are available to all UK residents 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.

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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