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Savers will need to lock funds for three years to beat inflation

CPI rose to 1.6% in December

Savers are being squeezed by a double whammy of low interest rates and rising inflation, meaning they’ll need to lock their money away for longer to grow it in real terms.

Which? analysis of Moneyfacts data reveals that just 45 accounts can match or beat inflation, compared to over 550 accounts that did this time last year.

Worse yet, if you want a return that’s higher than the current rate of inflation (1.6%, according to the Consumer Price Index), you’ll need to lock your money away for three years, or take some investment risk.

Here, we highlight some of the best inflation-beating deals available to savers. We’ve also included links to the Which? Money Compare tables where you can learn more about each account.

Which? Money Compare table: savings accounts and Isas – our tables are updated daily

 

 

Savings accounts offering inflation-beating returns

There are currently no cash Isas in the Which? Money Compare tables that can protect your spending power at current rates.

To find an inflation-beating savings account, you’ll have to lock up your funds for at least three years.

Over three years, Ikano Bank currently offers a table-topping rate of 1.75% AER. Ikano Bank is covered by the Swedish deposit protection scheme, rather than the UK-backed FSCS. Your savings are still covered to the new £85,000 limit. Click the link to learn more about the Ikano Bank 3 Year Fixed Saver.

Atom Bank, Masthaven, RCI Bank, Union Bank of India all offer 1.7% AER with their three-year fixed-rate savings accounts.

Savers can access better rates if they’re willing to lock up their funds for longer than three years. Vanquis Bank pays 1.96% AER on its four-year fixed-rate bond. If you’re happy to lock up your savings for five years, you can get a rate of 2.05% AER with Atom Bank and Ikano Bank. Click the links to find our more about the Atom Bank 5 Year Fixed Saver and the Ikano Bank 5 Year Fixed Saver.

The Which? Money Compare savings and Isa tables let you search hundreds of savings accounts and Isas from providers large and small to find a great savings rate based on quality of service as well as cost and benefits.

Which? Money Compare table: fixed-rate savings accounts – hundreds of deals compared

Current accounts still offering decent rates on small balances

Despite the very best current accounts cutting rates around the turn of the year, many still offer the best way to earn a meaningful interest rate, albeit only on small balances.

Nationwide’s FlexDirect account pays 5% AER on balances up to £2,500 for the first 12 months, falling to 1% AER thereafter.

Santander may have slashed the rate on its 123 Current Account, but it still pays 1.5% AER on balances up to £20,000 as well as cashback on household bills. You’ll need to check if that’s worth the £5 monthly fee.

Find out more: best bank accounts if you always stay in credit – we round up the best deals

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Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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