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The best savings accounts to beat inflation

Inflation rises to its highest level since June 2014

The best savings accounts to beat inflation

No instant-access accounts can beat inflation, meaning savers have to be prepared to lock their money away for longer to protect it from losing value in real terms.

Now that inflation has reached 1.8%, just 23 out of 697 savings accounts on the market pay enough to match or beat it.

What’s more, all of these accounts require you to lock your money away for at least four years.

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.

For those not interested in tying their money up for several years, we reveal the top-paying instant-access and one-year fixed products.

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 beat or match inflation.

In fact, only the best four and five-year fixed non-Isa deals pay high enough rates to do so.

Nearly all of these accounts are offered by lesser-known providers, with only one high-street name (Skipton Building Society) offering an inflation-beating rate.

Four-year fixed-rate savings deals

The top four-year fixed rate accounts are offered by Vanquis Bank and Ikano Bank Ikano Bank, and pay 1.96% AER and 1.95% AER respectively.

Ikano Bank is covered by the Swedish deposit protection scheme, rather than the UK-backed FSCS. Your savings are still covered up to the new £85,000 limit.

Masthaven Bank and Aldermore offer 1.91% AER and 1.85% AER respectively on their four-year fixed-rate savings accounts.

Five-year fixed-rate savings deals

Savers can access better rates if they’re willing to lock up their funds for five years. Masthaven Bank and Secure Trust both pay 2.06% AER on their five-year fixed rate bonds.

And you can get a rate of 2.05% AER with Atom Bank, Ikano Bank, Paragon Bank and Vanquis Bank.

But while these accounts currently offer inflation-beating returns, the risk in tying your money up for several years is that interest rates may rise in the meantime, and you’ll miss out on better deals.

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

The best instant-access and one-year fixed-rate deals

If you’re not willing to tie up your money for the long term or want instant access to your savings, unfortunately even the best rates on suitable accounts are lower than the rate of inflation.

Currently the top-paying ordinary instant-access savings account with no restrictions is RCI Bank UK, paying 1.1% on its Freedom Account. The best rate you can get if you fix your savings for a year is 1.5% AER, offered by Atom Bank.

Current accounts still offering decent rates on small balances

Despite a series of rate cuts on popular interest-paying current accounts, many still offer the best way to earn a meaningful return, 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 you’re likely to earn enough to outweigh the £5 monthly fee.

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

A glimmer of hope for savers

There is some good news for savers on the horizon. A new three-year bond is set to be launched by National Savings & Investments (NS&I) this spring, and is expected to pay a rate of around 2.2% AER. This would not only outstrip equivalent accounts on the market, but also those which require you to tie your money up for longer.

The account will be available to anyone aged 16 or over, but will only allow you to deposit up to £3,000.

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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