Derin Clark

Derin Clark

Online Reporter
Published: 21/06/2019

Inflation has fallen to 2.0% in May, down from 2.1% in April, which is good news for savers as it means more savings accounts now beat inflation. There are now 116 savings accounts that offer inflation-beating rates for a £10,000 deposit, the majority of which are within the fixed-rate bond sector. The reduction in the rate of inflation has resulted in 20 additional savings accounts that can now match, or beat, inflation.

Top six inflation-beating savings account

Provider Account Rate AER Min. deposit
Secure Trust Bank 7 Year Fixed Rate Bond 2.76% £1,000
PCF Bank 7 Year Term Deposit Issue 10 2.75% £1,000
Bank of London and The Middle East Premier Deposit Account 2.75% £1,000
Gatehouse Bank Fixed Term Deposit 2.75% £1,000
Bank of London and The Middle East Premier Deposit Account 2.70% £1,000
Secure Trust Bank 5 Year Fixed Rate Bond 2.66% £1,000

ISAs that beat inflation

There are now 15 ISAs that currently match or beat inflation, all of which are long-term fixed rate ISAs. The ISA offering the best fixed rate is United Trust Bank, which offers 2.35% on a £15,000 deposit. This seven-year fixed ISA does not allow further additions, but withdrawals are allowed, although early access comes with a penalty. Transfers in from cash ISAs and stocks & shares ISAs are allowed, while transfers out are allowed subject to an interest penalty. This account can only be open by post and then managed in-branch as well.

State Bank of India offers 2.15% on its 5 Year Cash ISA Fixed Deposit that requires a minimum opening deposit of £5,000. This five-year fixed ISA does not allow further additions or withdrawals. Early access is permitted on closure subject to 30 days’ notice although savers should be aware that if the account is closed before the first anniversary no interest is paid, while there is a 1% loss of interest if it is closed after the first anniversary. The account allows transfers-in from cash ISAs, while transfers out are subject to 30 days’ notice and up to 1% loss of interest. It can only be opened in branch, but then managed online and by post as well.

Also offering an inflation-beating rate is Metro Bank with its 5 Year Fixed Rate Cash ISA (Issue 7) that offers 2.10% AER. Unusually for an account offering a high interest rate on a long-term fixed rate term, this is a very affordable ISA that does not require a minimum opening deposit. Once open, this five-year fixed rate ISA allows further additions for 30 days from account opening, but withdrawals are not permitted. Early access is only allowed on closure subject to 180 days’ loss of interest. Transfers-in from cash ISAs, stocks & shares ISAs and Help to Buy ISAs are all permitted, while transfers out are allowed subject with a penalty of 180 days’ loss of interest. It can only be opened in branch and then managed online and by phone. 

The best inflation-beating monthly interest ISA

Another ISA offering a rate of 2.10% is Five Year Fixed Rate ISA (Issue 29) from Newcastle Building Society. This five-year fixed rate ISA requires a minimum deposit of £500 to open and, once open, allows both further additions while the issue remains open and withdrawals, and early access is subject to 365 days’ loss of interest. Transfers-in from Cash ISAs, stocks & shares ISAs and Help to Buy ISAs are allowed, while transfers out are also permitted but incur 365 days’ loss of interest. It can be opened online or in-branch and then managed both these ways, as well as by phone and post. There is also a version of this ISA that pays interest monthly at a slightly lower, but still inflation-beating, rate of 2.08%.

One-year fixed rate bonds that beat inflation

Nine one-year fixed rate bonds currently match or beat inflation. The top rate within the one-year fixed rate bond chart is from Al Rayan Bank, which offers an expected profit rate of 2.32% on its Fixed Term Deposit. This 18-month bond pays profit quarterly and requires a minimum deposit of £1,000 to open. Once open, further additions and withdrawals are not permitted. It can be opened and managed online, in-branch, by post, phone and via its mobile app.

Bank of London and The Middle East (BLME) also offers a highly competitive expected profit rate of 2.30%, which is available on its Premier Deposit Account. This 18-month bond requires a minimum opening deposit of £1,000. It does not allow further additions or withdrawals. The account must be opened online and then managed by post. BLME also offers a one-year version of this bond, which pays an expected profit rate of 2.20%. To open either bond, savers must have (or open) a BLME transfer account to hold funds pending investment.

The 12-month version of Al Rayan Bank’s Fixed Term Deposit also features high up the one-year fixed rate bond chart offering an expected profit rate of 2.17%. To open this bond a minimum deposit of £1,000 is needed. Once open it does not allow further additions or withdrawals. It can be opened and managed online, in-branch, by post, phone and via its mobile app.

Two-year fixed rate bonds that beat inflation

There are over 30 bonds within the two-year fixed rate bond chart that offer rates that match or beat inflation. The top rate in this chart is being offered by Al Rayan Bank, which is offering an expected profit rate of 2.42% on its Fixed Term Deposit. This 24-month bond pays expected profit quarterly and requires an opening minimum deposit of £1,000. It does not allow further additions or withdrawals and can be opened and managed online, in branch, by post, phone and via its mobile app. Al Rayan Bank is also offering an 18-month bond version of this account which pays an expected profit rate of 2.32%.

Offering the next best rate is BLME with its Premier Deposit Account, which pays an expected profit rate of 2.40% AER. This two-year bond requires a minimum opening deposit of £1,000. It does not allow further additions or withdrawals and can only be opened online and then only managed by post. BLME also offers an 18-month version of this account that pays an expected profit rate of 2.30% AER. Savers should be aware that to open a BLME account a BLME transfer account is needed to hold funds pending investment.  

Another account that is offering a high inflation-beating rate in the two-year fixed rate bond chart is Gatehouse Bank, which pays an expected profit rate of 2.30% on its Fixed Term Deposit. This two-year bond also requires a minimum deposit of £1,000 and once open does not allow further additions or withdrawals. It can only be opened and managed online.

Five-year fixed rate bonds that beat inflation

Over 35 accounts in the five-year fixed rate bond chart are offering rates at or above inflation. Offering the best rate in this chart is Gatehouse Bank, which is offering an expected profit rate of 2.75% AER on its Fixed Term Deposit. This five-year bond requires a minimum deposit of £1,000 and once open, does not allow further additions or withdrawals. It can only be opened and managed online.

BLME is also offering a rate well above in inflation with its Premier Deposit Account that pays an expected profit rate of 2.70%. This five-year fixed rate bond requires a deposit of £1,000 to open and once open, does not allow further additions or withdrawals. It can only be opened online and then managed by post. To open this account, you must open a BLME transfer account to hold funds pending investment is required.

The next best rate being offered in this chart is from Secure Trust Bank which pays 2.66% on its 5 Year Fixed Rate Bond. This five-year bond has a notice term until 15 July 2024 and requires a minimum opening deposit of £1,000. It allows further additions for 30 days from account opening; however withdrawals are not permitted. It can only be opened online and then managed by phone as well. There is also a version of this account that pays interest monthly at a slightly reduced rate of 2.63%.

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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