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Which are the best savings accounts to beat inflation?

CPI soars to 1% in September

Coin being put into a piggy bank

You can earn 1.1% AER with this week’s best instant-access cash Isa

UK inflation increased to 1% in the year to September, making it harder for millions of savers to find a cash Isa and savings account which beats it.

The Office for National Statistics revealed yesterday that the consumer prices index (CPI), which is the standard measure for inflation showing how prices have changed over the last 12 months, jumped up from 0.6% in August.

As a result, hundreds of savings accounts can no longer beat inflation. 

Here, we suggest some of the accounts that best protect your returns from being devoured by inflation.

If you’re keen to learn more about any of these deals, we’ve included links to the Which? Money Compare savings and Isa tables, which contain more information.

Tax-free savings to beat inflation

As all interest earned within a cash Isa is free from tax, you just need one that at least matches the headline inflation rate. Out of 113 variable rate cash Isas currently available, just 29 pay at least 1% AER, with the majority restricted to existing customers only.

The best instant-access Isa in the Which? Money Compare tables, excluding those with certain qualifying conditions and restrictions on withdrawals, is from Coventry Building Society, paying 1.1% AER. Click the link to find out more about the Coventry Building Society cash Isa. 

You can secure a better rate if you’re willing to tie up money for a year or more. For example, if you can lock up your savings for one year, you can earn 1.36% AER with the Al Rayan Bank 12 Month Fixed Term Deposit Cash Isa.  

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? Comparison Table: fixed-rate cash Isas  – hundreds of deals compared

Hundreds of savings accounts are unable to beat inflation

Since April 2016, all basic and higher-rate taxpayers have been entitled to a new personal savings allowance. Under this allowance, basic-rate (20%) taxpayers are able to earn £1,000 in savings interest tax-free each year, while higher-rate (40%) taxpayers can earn £500. However, if you earn more than this, or if you’re an additional-rate tax payer, you’ll have to pay tax on the interest earned. 

Either way, you’ll need to tie up your money for at least a year to beat inflation.

The best one-year and two-year fixed-rate savings accounts in the Which? Money Compare tables are from Atom Bank, paying 1.4% AER and 1.65% AER respectively. Click the links to learn more about Atom Bank one-year account and two-year accounts.    

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

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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.

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.

Categories: Money, Savings & Isas

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