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Savers rejoice: inflation drops to 2.6%

Discover your best options for beating inflation

The Consumer Price Index (CPI) fell to 2.6% in June, giving your cash stockpiles a much-needed boost – but as inflation continues to outstrip most savings accounts, how can you get the best returns on your money?

According to latest CPI figures, inflation has dipped by 0.3% since May, when the CPI was at 2.9%. This month-on-month decrease was attributed mostly to cheaper fuel prices.

But despite the significant drop, there are still no savings accounts or cash Isas that can match or beat this rate. Savers will therefore need to look outside these accounts to prevent their cash losing value in real terms.

Here, we explore four ways to help your savings beat inflation.

High-interest current accounts

There are a handful of current accounts that provide inflation-busting interest rates, albeit only on small balances.

Nationwide pays 5% AER on balances up to £2,500 in the first year, dropping to 1% thereafter. Tesco Bank pays 3% AER on balances up to £3,000.

Most current accounts only pay interest to those who set up a minimum number of direct debits and credit their account by a certain amount each month – so make sure to check the terms of the account before switching.

Find out more: best bank accounts if you’re always in credit – see our tables

Regular savings accounts

Regular savings accounts provide another zero-risk way to beat inflation on small balances. But you’ll have to open a current account with the provider to access the best rates.

First Direct, HSBC, M&S Bank, Nationwide, Santander all offer regular savings accounts paying 5% to their current account holders.

Keep in mind that the amount you can drip-feed into these accounts each month is capped. First Direct will let you deposit £300 a month, while HSBC, Nationwide, M&S Bank will let you squirrel away £250 a month. With the Santander regular saver, deposits are capped at £200 a month.

Which Money Compare table: regular savings accounts – our tables are updated daily

Peer-to-peer lending companies

If you’re willing to take more risk with your money, peer-to-peer lending companies could provide an appealing option for your savings.

Which? members have rated the UK’s four biggest peer-to-peer lending sites – RateSetter, Zopa, Funding Circle and Wellesley and Co. Find out the pros and cons of each company, plus the expected rates of return for lenders, in our reviews.

Find out more: Peer-to-peer lending company reviews – get the lowdown on peer-to-peer lending

Investing in the stock market

Investing in stocks and shares is generally seen as a viable long-term strategy for growing your savings. But returns are not guaranteed – there is always the risk that the value of your investments could go down as well as up.

If you’re unsure where to start, check our beginner’s guide to investing and our 10 steps to finding the best stocks and shares Isa.

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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