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Revealed: the 14 savings accounts with inflation-beating rates

Find out which fixed-term accounts offer the best interest rates

Savers rejoice. There are now 14 fixed-rate accounts that can offer inflation-busting rates to boost the value of your money.

In September, banks announced more than 309 increases to savings rates – the highest number of rises since December 2017, according to Moneyfacts. By comparison, there were just 33 cuts to interest rates last month.

What’s more, the inflation rate announced in September was a lower-than-anticipated 2.4% – meaning there are now 14 fixed-rate accounts with rates that outstrip inflation.

We explain which accounts offer above-inflation rates, the pros and cons of long-term bonds and how inflation affects your savings.


Best-rate fixed-term savings accounts

The Consumer Prices Index, which measures the cost of consumer goods and services, fell to 2.4% during September. But why does this matter for your savings?

The CPI measures how much more expensive goods and services are becoming over time. If your money is not earning interest equal to or greater than the inflation rate, it’s losing value in real terms, because you can buy less with the same amount of cash.

In August, when the inflation rate was 2.7%, just one account was able to offer an inflation-beating rate. And for several months before that, no accounts could match inflation at all.

But as providers have upped their interest rates, spurred on by a base rate rise in August, more and more accounts are now offering interest that outstrips price growth.

Below, we round up all the fixed-rate products that offer rates above inflation. Links take you to further details on our comparison site, Which? Money Compare.

Provider AER Notice/term Minimum investment
BLME 2.75%* 7 years £10,000
Ikano Bank 5 Year Fixed Saver** 2.7% 5 years £1,000
Close Brothers Savings 2.7% 5 years £10,000
BLME 2.7%* 5 years £10,000
Gatehouse Bank 5 Year Fixed Term Deposit 2.68%* 5 years £1,000
Paragon 5 Year Fixed Rate Account 2.66% 5 years £1,000
Masthaven 5 Year Fixed Term Bond 2.6% 5 years £500
Atom Bank 5 Year Fixed Saver 2.5% 5 years £50
Hodge Bank 5 Year Fixed Rate Account 2.5% 5  years £1,000
Tesco Bank 5 Year Fixed Rate Saver 2.5% 5 years £2,000
BLME 2.45%* 4 years £10,000
Ikano Bank 4 Year Fixed Saver** 2.45% 4 years £1,000
Vanquis Bank 5 Year Fixed Rate Bond 2.45% 5 years £1,000
Al Rayan Bank 2.42%* 36 months £1,000

* This provider does not pay an interest rate, but rather an expected profit rate
** Provider is not covered by Financial Services Compensation scheme, but rather the Swedish Deposit Guarantee Scheme
Source: Moneyfacts, correct as of 23 October

Is a long-term fixed rate right for me?

As you can see from our analysis, you’ll need to lock your money away for several years to get the best rate, with all but one top-rate account carrying a term of more than four years.

Think carefully before committing your money for this amount of time. With most fixed-rate accounts, you aren’t permitted to withdraw your money early. The ones that do permit early withdrawals are likely to charge penalties on interest earned.

The base rate and inflation rate could vary in coming years in ways that could be unpredictable – what seems like a good deal now could become a low-interest trap. On the other hand, a longer-term fixed-rate account can give you peace of mind and offer protection if rates fall.

A number of the top-rate accounts are offered by Islamic savings providers, including BLME, Gatehouse Bank and Al Rayan. These banks publish an expected profit rate, rather than an interest rate. In all three cases, the providers will contact you if the expected profit rate changes and provide you with the opportunity to withdraw your funds, plus interest earned.

Many of these accounts also require a high initial deposit of £10,000, which is out of reach for many savers. If you have a more modest savings pot, Gatehouse Bank offers an expected profit rate of 2.68% on an initial deposit of £1,000. Atom Bank’s five-year fixed-rate saver, meanwhile, allows a minimum deposit of just £50.

Alternatively, you may wish to keep your money within an Isa account to avoid paying tax on  your interest. The best-rate cash Isa is currently the Shawbrook Bank 5-Year Fixed-Rate Cash Isa Bond which pays 2.25% – just below the inflation rate.

Alternatives to fixed-rate accounts

If a long-term fixed-rate account won’t work for you, some regular savings accounts also offer attractive rates, with First Direct, M&S Bank and HSBC rewarding savers with up to 5% interest.

However, these accounts tend to come with strict rules that you must meet to earn the maximum interest rate.

For all three top accounts, you need to have another product with the same provider. You’ll also need to commit to a minimum monthly deposit of at least £25, and you won’t be able to contribute more than the maximum monthly deposit either.

All three providers cap the total amount you can hold in the account. HSBC and M&S Bank limit you to £3,000, while First Direct allows you to deposit £3,600.

With the maximum monthly deposit restrictions, this means the most you’ll earn is £97.50 with First Direct, and £81.25 with HSBC and M&S.

Finally, you won’t be able to make withdrawals within 12 months of opening the account or you’ll forfeit the higher interest.

Provider AER Minimum monthly deposit Maximum monthly deposit
First Direct Regular Saver 5% £25 £300
M&S Bank Monthly Saver 5% £25 £250
HSBC Regular Saver Preferential Rate 5% £25 £250

Editor’s note: a previous version of this article showed incorrect maximum interest earnings for the regular savings accounts.

How to find the best savings provider

Getting the best possible interest rate is likely to be your primary goal when choosing a new savings account, but it’s worth considering other factors as well.

Questions you should weigh up include:

  • Do you need access to your money? While instant-access savings accounts tend to have lower rates, you’ll be able to withdraw your money at any time. It could be worth keeping a portion of your money in a fund that allows withdrawals for use in an emergency.
  • How much are you able to deposit? Some top interest rates may only be available to those with deposits of more than £10,000. If your deposit is less than £1,000, you may struggle to find a high-interest account.
  • When will your interest be paid? If you want your savings to generate an income stream, look for accounts that pay monthly interest. Alternatively, many top-rate accounts pay out on the anniversary of the account opening.
  • Do you need a tax-free wrapper? Savings interest is taxable income, though you may benefit from the personal savings allowance. To avoid tax, you can keep your savings in an Isa account and deposit up to £20,000 a year.
  • Is your interest paid away or compounded? Some accounts will pay your interest into a separate account, so that you only earn on what you deposit. Others will pay your interest into the same account, allowing it to compound.
  • Is your account from a Which? Recommended Provider?  We’ve asked thousands of people to rate their savings providers, resulting in unique Customer Scores to show you how satisfied people are with their bank. You can find out more about Which? Recommended Providers in our guide to finding the best savings account.

Whichever option you choose, it pays to shop around. You can use Which? Money Compare to search hundreds of savings products and find the right one for you.

Please note that the information in the table(s) above is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of the savings account provider before committing to any financial products.

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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