Inflation stayed put at 3% in October, but this still means it's all but impossible to secure a meaningful return from your savings. Indeed, our own data shows that still not one standard savings account pays a rate that even comes close, so negative interest rates are becoming a very real thing - which means that, in real terms, your money is being eroded. Unless you can find an account that beats it.
"But," I hear you cry, "didn't you say that no savings account even comes close?" I did, but I also uttered the word "standard". Indeed, there are still a few non-standard savings vehicles that can match or even beat 3%, which means it's time to start thinking outside the box.
By that I mean you'll want to start looking at regular savings accounts, high interest current accounts, or even stocks & shares ISAs for those comfortable with risk. Below we outline the top inflation-beating accounts currently available in these markets, any one of which could ensure you're seeing actual returns on your money.
High interest current accounts
High interest current accounts may not be a type of savings account per se, but they offer some of the best rates around, and provided you're willing to jump through a few hoops, you could easily use them to secure real returns on your savings. Here are just two of the best options available - you can find a lot more in our Best Buys.
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Nationwide BS
FlexDirect - Funded
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5.00% AER |
- 5% interest paid on balances of up to £2,500 for 12 months (1% thereafter), provided the minimum funding requirement of £1,000 per month is met
- Preferential terms for loans, mortgages, credit cards and savings accounts
- Earn cashback at selected retailers and benefit from additional discounts and deals
- Manage by post, phone, online, app and in Post Office branches
- 0% interest on authorised overdrafts for 12 months (overdraft fee of up to 50p per day charged thereafter)
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Nationwide's high interest current account offers an in-credit interest rate that's over and above the current level of CPI, boasting an inflation-beating 5% for the first year. This level of interest is only available on balances of up to £2,500, but for those with a small savings pot who are effectively seeking a short-term home for their cash, it could be ideal, provided they can keep up with the regular funding requirement.
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TSB
Classic Plus
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3.00% AER
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- 3% interest paid on balances of up to £1,500, provided £500 is paid in every month and online banking and paperless statements are active
- Get £5 cashback per month when 20 debit card payments are made, and another £5 when two or more direct debit mandates are held
- Eligible for a linked cashback credit card and preferential mortgage terms
- Interest and fee-free overdraft buffer of £10, and an introductory authorised overdraft rate of 0% for three months (authorised overdrafts of £25+ charged at 19.84% EAR with a £6 monthly usage fee thereafter)
- Manage account by phone, in branch, online, via app and at Post Office counters
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The TSB Classic Plus account offers an inflation-matching rate of 3.00% for those who want to save a maximum of £1,500, but as well as that, it offers cashback every month. This means you have the potential to earn far more than you could do with a standard savings account, ensuring you get truly growth-generating returns.
Regular savings accounts
Regular savings accounts may not allow you to squirrel away huge amounts of cash, but they certainly offer the chance to secure an above-average return on your savings. Again, you'll come up against a few restrictions, but they could be a small price to pay.
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Saffron BS
12 Month Fixed Rate Regular Saver (Iss 3)
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3.50% AER
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- 12-month fixed rate bond
- Minimum investment of £10 up to a maximum £2,400, with monthly contributions of between and £10 and £200 accepted
- 12 payments are required per year, but there's no missed payment penalty. Withdrawals and additional payments are also permitted
- Contributions can be made by standing order, cheque and cash, and can be amended
- Account must be opened in branch before becoming branch and postal-operated (existing members can also apply by post)
- Interest paid on maturity
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This deal from Saffron Building Society easily beats inflation, paying 3.50% on maturity from a minimum investment of just £10. You can save up to £2,400 over the course of the 12-month term, and you won't even be penalised should you miss a payment.
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Santander
Regular eSaver (Issue 6)
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3.00% AER
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- One-year fixed rate bond
- No minimum investment but a maximum of £2,400, with monthly deposits of up to £200
- No minimum number of payments required
- Additional payments allowed, provided the monthly maximum is not exceeded, and withdrawals permitted as well
- Contributions can only be made by standing order and cannot be amended
- Linked product: saver must have or open a Santander current account for transactional purposes, with all payments and withdrawals to be made via this account
- Account can be opened online or in branch before becoming app and internet-operated
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This account from Santander comes with a few more restrictions - namely the linked current account requirement and sole contribution method - but if you're happy with those, the inflation-matching rate of 3.00% means you can't go wrong.
Stocks & shares ISAs
These accounts should only ever be considered by those comfortable with risk, but if you're happy with the fact that you may end up with less than you put in, it could well pay off. That's because, although there's more risk, there's also the potential for far greater returns, and with stocks & shares ISAs continuing to outpace their cash-based counterparts in terms of performance, they could be worth considering.
Just make sure you familiarise yourself with this kind of account first, and ideally seek financial advice before you proceed. Then, check out our list of some of the available ISA funds - we're not covering them here as the list is more of a general overview as opposed to a Best Buy chart - to see the type of thing on offer.
