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July CPI and RPI inflation: what it means for rail fares and savings

Find out what July’s inflation figures mean for your money

The UK Consumer Prices Index (CPI) measure of inflation jumped to 2.5% in July 2018, while the Retail Prices Index (RPI), which determines rail fares for commuters next year, fell to 3.2%.

This month’s inflation report from the Office for National Statistics (ONS) is particularly important as the RPI figure – which is typically higher than CPI – is used by the Department for Transport to set the maximum annual increase for regulated fares for January 2019.

We take a look at why CPI inflation has changed, what July’s RPI measure means for the cost of your commute and if there are any savings accounts that can beat inflation now.


Why CPI inflation has jumped

The CPI measure of inflation measures how a hypothetical basket of more than 700 goods and services have changed each month compared with the same time last year.

July’s inflation rate, which is the first increase since November 2017, was influenced by the rising cost of fuel, transport fares and computer games.

Meanwhile, July’s RPI measure of inflation – which is measured using a slightly different basket of goods, different parts of the population and a different formula – dropped to 3.2%.

RPI lost its status as a national statistic in 2013 and is widely regarded as a ‘very poor’ measure of inflation but is still used to decide the prices on a range of household outgoings, such as mobile phone bills and rail fares.

What July’s RPI inflation rate means for rail fares

The ONS announcement today will mean millions of rail passengers that use the train to commute to work will face a rise of up to 3.2% on train tickets from January 2019.

July’s RPI inflation allows rail companies to raise the cost of regulated fares, which includes season tickets, some off-peak fares and walk up anytime tickets around major cities in England and Wales.

In Scotland, commuters will be the hardest hit, as the change applies to season tickets while off-peak fares hikes are limited to July’s RPI minus 1%. There are no plans for increases in Northern Ireland.

Unregulated fares, which cover super off-peak and advance tickets, will be decided later this year in December.

Which? is currently calling for improvements to rail services, which are plagued with delays, cancellations and overcrowding.

Peter Vicary-Smith, chief executive of Which?, said:These price rises are yet more bad news for passengers, many of whom have endured a summer of chaos, including cancellations, delays, overcrowding and poor service from train companies.

‘For passengers to genuinely feel they are getting value for money and a rail system that works for them, train companies must improve the reliability and safety of their services, and pay out compensation quickly and hassle-free where it is owed.’

What July’s CPI inflation rate means for savings

CPI inflation is an important measure to watch if you have cash savings. That’s because if your savings don’t match or beat the rate of inflation, your pot will lose purchasing power and the amount you have stashed away will buy you less over time.

To stop your savings losing value in real terms, you should always be on the look out for an inflation-beating interest rate.

Can any savings account beat inflation?

The table sets out the accounts paying the most interest on cash across instant access, notice and fixed-rate deals according to Which? Money Compare.

Name of account Type of account Rate AER Minimum deposit
Coventry Building Society Limited Access Saver (2) Instant access 1.4% £1
Virgin Money Double Take Cash E-Isa Instant access cash Isa 1.35% £1
Charter Savings bank 95-Day Notice Cash Isa Issue 3 95-day notice cash Isa 1.4% £1,000
Secure Trust 180-Day Notice Account 180-day notice 1.81% £1,000
Wyelands Bank 12-Month Fixed-Rate Bond One-year fixed-rate bond 2.05% £5,000
Secure Trust Bank Two-Year Fixed-Rate Bond Two-year fixed-rate bond 2.26% £1,000
Al Rayan bank 24-Month Fixed-Term Deposit Cash Isa Two-year fixed-rate cash Isa 1.8%* £1,000
Secure Trust Bank Three-year Fixed-Rate Bond Three-year fixed-rate bond 2.37% £1,000
Shawbrook Bank Three-Year Fixed-Rate Cash Isa Bond Issue 9 Three-year fixed-rate cash Isa 1.85% £5,000
Secure Trust Bank Four-Year Fixed-Rate Bond Four-year fixed-rate bond 2.51% £1,000
Hodge Bank Four-Year-Fixed-Rate Cash Isa Four-year fixed-rate cash Isa 1.8% £1,000
Secure Trust Bank Five-Year Fixed-Rate Bond Five-year fixed-rate bond 2.69% £1,000
Shawbrook Bank Five-Year Fixed-Rate Cash Isa Bond Issue 10 Five-year fixed-rate cash Isa 2.3% £5,000

*Expected profit rate

Source: Which? Money Compare

Currently, just two accounts – the Secure Trust Bank Four-Year Fixed-Rate Bond and the Secure Trust Bank Five-Year Fixed-Rate Bond – offer an inflation-beating rate.

However, they require you to lock up your money for four years or more, which means you could miss out if rates start to rise.

Of the market-leading deals, Coventry Building Society offers the best easy access account right now paying 1.4% AER and has the highest Which? Customer Score of 70%, making it a Which? Recommended Provider.

Which? Recommended Providers are companies that have been rated highly by the respondents to our unique customer survey and have products that meet the high standards of our researchers.

Editor’s note: A previous version of the this article mistakenly described a cash Isa from Chorley Building Society as a one-year term, rather than a two-year term. This has now been updated.

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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