Savvy savers hoping to beat inflation can now choose from over 375 savings and cash Isa accounts that equal or outdo the CPI rate.
By comparison, last month just 172 accounts could match or outpace inflation.
Savers are benefiting from a fall in inflation – from 2.1% in December 2018 to 1.8% in January – as well as a gradual increase in savings and Isa rates.
Here, we reveal which accounts can beat inflation, and give the top-rate deals in each category.
Fixed-rate savings accounts that beat inflation
For some time now, long-term fixed-rate accounts have been the only option to bust inflation, requiring you to lock your money away for several years.
Back in December 2017, when inflation was at 3%, there were no accounts that could beat it. Since then, inflation has dropped significantly to 1.8% and rates have also started to creep up. The top rate on offer is currently 2.7%, whereas back then it was just 2.51%.
As the graph below shows, January 2019 saw the average long-term savings rate beat CPI inflation for the first time since November 2016. The average long-term cash Isa rate is just 0.2% behind.
Best-rate savings accounts
Which analysed more than 1,600 accounts using data from Moneyfacts. We found 202 fixed-term savings accounts with AER interest of 1.8% or above, and you don’t have to commit to a five-year fixed-rate period.
All accounts require a minimum initial investment of £5,000 or less, and we’ve stripped out all duplicate accounts – meaning those that have slightly different terms, but are essentially the same offer.
Top short-term savings accounts
In what is likely to be a novelty to savers, it’s not necessary to lock your money away for five years in order to beat inflation – just a year will do.
There are 23 one-year savings accounts that equal or beat the 1.8% rate, but the top ones are:
- Al Rayan Bank 12-month fixed-term deposit, 2.17% Expected Profit Rate (EPR)
- Bank of London & The Middle East one-year Premier Deposit Account, 2.05% EPR.
- QIB one-year fixed-term deposit (Raisin issue), 2.05% EPR
All three accounts require a minimum initial deposit of £1,000.
Top long-term savings accounts
As is usually the case, the longer you lock your money away for, the better interest you’ll earn.
The top rates available on fixed-term savings are:
- Bank of London & The Middle East seven-year Premier Deposit Account, 2.75% EPR
- Bank of London & The Middle East five-year Premier Deposit Account, 2.7% EPR
- Gatehouse Bank five-year fixed-term deposit, 2.68% EPR
Again, all accounts require a minimum initial deposit of £1,000.
Find out more: how to find the best savings account
Cash Isas that exceed CPI
There are 46 cash Isas that match or beat inflation – up from just nine accounts last month. And even shorter-term fixed rates will offer inflation-busting returns.
Six two-year fixed-rate cash Isas exceed 1.8%. The three highest rates are:
- Shawbrook Bank two-year fixed-rate cash Isa bond, 1.91% AER
- Charter Savings Bank two-year fixed-rate cash Isa, 1.87% AER
- Cynergy Bank two-year fixed-rate cash Isa (advertised rate), 1.82% AER
Bear in mind that the Shawbrook Bank account requires a minimum initial deposit of £5,000, while Charter Savings Bank specifies £1,000 and Cynergy Bank requires £500.
But there are even higher interest rates to be found if you’re prepared to commit to a longer fixed period.
The three top-rate cash Isas for longer-term saving are:
- Charter Savings Bank five-year fixed-rate cash Isa, 2.26% AER
- Shawbrook Bank five-year fixed-rate cash Isa, 2.13% AER
- Newcastle Building Society five-year fixed-rate Isa, 2.1% AER
Again, Shawbrook Bank requires you to save at least £5,000, Charter Savings Bank requires £1,000 and Newcastle Building Society requires £500.
Cash Isa tax benefits
While cash Isa rates still lag behind the top-rate savings accounts, your earnings will remain tax-free and won’t count towards your personal savings allowance.
However, you’ll only be able to deposit up to £20,000 in each tax year – known as your annual Isa allowance.
Find out more: how to find the best cash Isa
Regular savings that pay off
In addition to the Moneyfacts data, we identified 32 regular savings accounts that also pay above the rate of inflation.
However, many come with very specific caveats and require deposits to be paid every month, so make sure you can commit before you open one.
The top rates are:
- First Direct regular saver account, 5% AER
- M&S Bank monthly saver, 5% AER
- HSBC regular saver – preferential rate, 5% AER
All of these accounts require at least £25 to be paid in each month. You can deposit a maximum of £300 a month with First Direct, and up to £250 with M&S Bank and HSBC.
You’ll also need to hold other accounts with each provider before you’re eligible for the regular savers deals.
First Direct’s AER only last for 12 months, after which time it will plummet to 0.15% AER – so make sure you switch after a year.
The M&S Bank account requires you to keep the account open for at least a year in order to receive the 5% interest. Closing the account early will mean any savings you deposited will only earn 0.2% AER.
To receive the preferential rate from HSBC, you must hold an HSBC Premier or HSBC Advance account – both of which require a fairly high minimum deposit to be paid in each month. The rate also drops to 0.2% AER if you close the regular saver account within 12 months.
Find out more: what are the different types of savings account?
Top-rate Junior cash Isas
If you’re looking to save for your children, you can save up to £4,260 in a Junior Isa in the 2018-19 tax year, rising to £4,368 in 2019-20.
There are 36 Junior cash Isas that pay equal or more than the rate of inflation. The three top-rate accounts are:
- Coventry Building Society Junior cash Isa, 3.6% AER
- Danske Bank Junior cash Isa, 3.45% AER
- Darlington Building Society Junior cash Isa, 3.25% AER
Two of these accounts are restricted by your location – Danske Bank’s account must be opened in-branch, and all branches are in Northern Ireland. Meanwhile, only customers living in certain postcodes can open an account with Darlington Building Society.
Find out more: best Junior cash Isas
Cash in with Help to Buy Isas
Help to Buy Isas help first-time buyers save up for a home, and when your transaction completes, the government pays an additional 25% bonus to bolster your cash.
There are 25 Help to Buy Isas that exceed the rate of inflation. The top three rates are:
- Penrith Building Society Help to Buy Isa, 3% AER
- Tipton & Coseley Building society Help to Buy Isa, 2.95% AER
- Vernon Building Society Help to Buy Isa, 2.85% AER
However, all of the top-rate accounts are only open to local residents, so check the eligibility criteria before you apply. The highest rate available nationwide is the Barclays Help to Buy Isa, paying 2.58% AER – still well-above inflation.
Find out more: Help to Buy Isas explained
Children’s savings accounts that beat inflation
There are 27 children’s savings accounts that equal or beat inflation.
The top-paying accounts are:
- Nationwide Future Saver (existing customers), 3.5% AER
- Melton Mowbray Building Society Wild Ones Young Savers 30-day notice, 3.04% AER
- Nationwide Future Saver, 2.5% AER
While the Nationwide account is billed as being ‘instant-access’, you’ll only receive the advertised rate if you limit yourself to one withdrawal per year – any more and the AER will drop to 0.5%.
We also found some regular children’s savings accounts with high rates of interest:
- Halifax Kids’ Monthly Saver (0-15 yrs), 4.5% AER
- Saffron Building Society Children’s Regular Saver (0-15 yrs), 4% AER
- Barclays Children’s Regular Saver (0-17 yrs), 3.5% AER
The Halifax account requires a payment of £10-£100 each month, and no withdrawals are allowed.
The Barclays and Saffron Building Society accounts require you to pay in £5-£100 a month. Barclays will reduce the AER to 1.51% in any month a withdrawal is made.
Find out more: best children’s savings accounts
Why is it important for savings rates to beat inflation?
The CPI measure of inflation tracks the prices of an imaginary shopping basket containing around 700 popular goods and services.
This including everything from flights, fuel and train tickets, to milk, alcohol and even gym leggings.
The prices are compared to those from the same time the previous year, and the overall price difference is the rate of inflation.
If you leave cash in a savings account during that year, and it hasn’t been earning interest at the same rate or more, that cash will essentially be worth less than it was a year ago, because it won’t be able to buy as many of those goods and services.
You can browse through hundreds of savings products at Which? Money Compare.
Please note that the information 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.