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Derin Clark

Derin Clark

Online Reporter
Published: 16/06/2021
inflation road sign

Despite the savings charts starting to stabilise, savers are facing a challenging market as the Consumer Price Index (CPI) rose to 2.1% in May, resulting in no accounts offering rates that are able to match or beat inflation.

The top paying account in the savings chart today is 1.60%, which is paid on maturity on a five year bond. Meanwhile, the top ISA rate is 1.24%, again payable on maturity on a five year term. This means that the current savings market and with the rate of inflation predicted to increase, savers locking into a new deal will likely see their savings erode due to inflation in real terms.

“Inflation is clearly unforgiving on savers cash and the rate is expected to rise further in the months to come,” revealed Rachel Springall, finance expert at “There is currently not one standard savings account that can outpace its eroding power and we may see the rate rise to 2.3% during April to June 2022. Savers who are already locked into an account that beats today’s inflation rate would be wise to see when their deal is set to mature and start to consider where to save their cash next.

“Savers who are looking to lock into the best rate regardless of the effect of inflation would be wise to act quickly, as some headline grabbing rates seen in recent weeks have since been cut. Indeed, Aldermore were leading the market with a 1% one year fixed bond, but after one week the rate dropped to 0.75%. Atom Bank and Zopa had one year fixed bonds paying 0.85% in May but Atom Bank has since been cut to 0.75% and Zopa now pays 0.80%. It is clear to see from recent changes that challenger banks are fuelling competition, but not all the top deals have a long shelf life.”

Options available to savers

Savers looking to quickly access their funds will have to settle for the lower rates offered on easy access savings accounts and ISAs. To give savers an idea of the types of rates available on the these accounts the current highest easy access savings rate is 0.50% and the highest easy access ISA rate is 0.54%. In return for these rates, however, savers are able to quickly access their funds in the accounts, making them a good choice for those saving towards an emergency fund.

For those happy to lock their money into an account for the short-term, a one year fixed rate bond or ISA may be an option. Again, savers have to keep in mind that the top rates on these accounts are significantly lower than the current rate of inflation with the top one year fixed bond rate standing at 0.91% and the top one year fixed ISA rate at 0.56%.

Long-term savers who already have an emergency savings fund, may want to consider investing as an alternative option to a long term fixed bond or ISA. Investing, such as in a stocks and shares ISA, carries the risk of the investor not making any returns on their investment, along with the possibility of losing all their money including their initial deposit, but can also generate a good return on investment. There are often additional costs when investing that need to also be taken into account, as such those considering this option may want to consider speaking to an independent financial advisor first to ensure it is the right decision for their individual financial situation. To find out more about investing and the different options available read our how to invest your money guide.

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inflation road sign

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