Savings accounts that beat inflation
With a drop in inflation, there are now more savings accounts with interest rates that beat tax and inflation.
The news that the Consumer Prices Index measurement of inflation fell by 0.3% to 1.2% in September should be welcomed by savers, as it makes finding an inflation-beating savings account a little easier.
The rate is the lowest it’s been since September 2009, when CPI was 1.1%.
For hard-pressed savers who want a decent return, there are a few more options, but the landscape is still a little bare. Of the 873 savings accounts currently available, only 322 pay out enough to negate tax and inflation, though that number has risen by almost double in the past two months.
It’s certainly better than October 2013 when inflation stood at 2.7%. Savers needed an account paying 3.38% to beat inflation, met by only nine savings accounts.
To save you trawling through those 322 different accounts, we’ve rounded up some of the very best here.
Inflation-busting accounts
For basic rate taxpayers, you’ll need an account that pays out at least 1.50% to get an inflation-beating return.
You’ll notice that some of these are current accounts as they pay out at rates way above inflation, beating most savings accounts.
|
Account |
Type |
Gross interest rate |
Minimum deposit |
Maximum deposit |
Access |
|
Current account |
5.00% (for first 12 months) |
£1,000 |
£2,500 |
Unlimited |
|
|
Current account |
5.00% |
£1 |
£2,000 |
Unlimited |
|
|
Secure Trust Fixed Rate Bond |
Seven-year bond |
3.52% |
£1,000 |
£1,000,000 |
None for seven years |
|
FirstSave Seven Year Bond |
Seven-year bond |
3.5% |
£1,000 |
£2,000,000 |
None for seven years |
|
SecureTrust Fixed Rate Bond |
Five-year bond |
3.22% |
£1,000 |
£2,000,000 |
None for five years |
|
Five-year bond |
3.21% |
£1,000 |
£250,000 |
None for five years |
|
|
Tesco Bank Fixed Rate Saver |
Five-year bond |
3.10% |
£2,000 |
£5,000,000 |
None for five years |
|
FirstSave Five Year Fixed Rate Bond |
Five-year bond |
3.08% |
£1,000 |
£2,000,000 |
None for five years |
|
SecureTrust Fixed Rate Bond |
Four-year bond |
3.01% |
£1,000 |
£2,000,000 |
None for four years |
|
Shawbrook Bank Five Year Fixed Rate Bond |
Five-year bond |
3.00% |
£5,000 |
£2,000,000 |
None for five years |
|
Market Harborough BS Five Year Fixed Term Bond |
Five-year bond |
3.00% |
£1,000 |
£50,000 |
None for five years |
|
Aldermore Five Year Fixed Rate Account |
Five-year bond |
3.00% |
£1,000 |
£1,000,000 |
None for five years |
|
Tesco Bank Current Account |
Current account |
3.00% |
£1 |
£3,000 |
Unlimited |
|
Current account |
3.00% |
£3,000 |
£20,000 |
Unlimited |
|
|
Bank of Scotland Classic Account with Vantage |
Current account |
3.00% |
£3,000 |
£5,000 |
Unlimited |
If you don't want to lock your cash up for quite that long, there's a handful of bonds over 12-18 month periods paying 2% from Islamic Bank of Britain, Bank of Cyprus and Bank of London & the Middle East. Over two years Islamic Bank of Britain pays 2.30% and you’ll get 2.50% on a three-year fixed term bond with the United Trust Bank.
High rate taxpayers need to find accounts that pay at least 1.90% in net interest.
Compare current accounts with lovemoney.com
Cash ISAs
Cash ISAs are a brilliant option as they’re tax-free, so you’d only need an interest rate of 1.3% to beat inflation. In the table below we have broken down the top inflation-beating Cash ISA for a range of fixed rate terms.
|
Account |
Term |
Interest Rate (AER) |
Minimum deposit |
Notes |
|
Virgin Money Fixed Rate Cash E-ISA Issue 91 |
Five years |
2.80% |
£1 |
Further additions allowed up to 30 days after account opening |
|
Coventry Building Society Fixed Rate ISA |
Four years |
2.60% |
£1 |
|
|
Virgin Money Fixed Rate Cash ISA
|
Three years |
2.25% |
£1 |
Further additions allowed up to 30 days after account opening |
|
Virgin Money Fixed Rate Cash ISA |
Two years |
2.10% |
£1 |
Further additions allowed up to 30 days after account opening |
Compare savings accounts with lovemoney.com
A different kind of investment
If you fancy trying something a little riskier, there’s peer-to-peer (P2P) lending. This way, you loan out money through websites who act as a go-between between you and the borrowers. There are no banks involved and it’s an ideal way to support other people or small businesses.
Companies like Zopa, RateSetter, LendingWorks and FundingCircle offer rates above 5% if you lend out money for five years.
Compare more savings accounts with lovemoney.com
The original article has been updated
More on saving:
Where to earn most interest on your cash
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