There was terrible news for savers this week after it was revealed that the CPI rate of inflation more than doubled from 0.7% in March to 1.5% in April.
According to the Office for National Statistics revealed, the sharp rise was largely due to spikes in energy bills, clothing and petrol prices.
So why does this matter?
Rising inflation obviously represents a challenge to savers, who must at the very least aim to beat it to prevent their money from losing value in real terms.
The challenge is made trickier by the fact that current savings rates are truly awful and there are now very few accounts that can even beat inflation – and those that do only accept very small deposits.
It's a pretty gloomy picture for savers, but this doesn't you should simply accept defeat and leave funds languishing in an awful account.
We'll explain why it's still worth putting the effort in to move your money around in a bit, but first, here's a quick explanation of why savings rates are so dreadfully, depressingly low.
Why savings rates are so low
The Bank of England cut the official Base Rate of interest to a record low 0.1% last year and pledged huge wads of cheap cash to banks to keep them lending, and it’s all too easy to see just how dramatically the top savings rates have changed as a result.
Before the Base Rate was cut, a handful of traditional easy access accounts paid 1.45%, but the best you can do now is 0.5% – which is nowhere close to even meeting inflation, let alone beating it.
Fixed-rate accounts paying over 2% were widely available not too long ago, but now 1.4% is the best you can get – it won’t beat inflation and you'll have to lock away your money for five years to get that rate.
Similarly, some current accounts would allow you to earn a hefty 5% on small savings pots, but nowadays 2.02% is the best rate you can get.
Incidentally, these also represent the only way you can beat inflation in the current market.
Rates are awful: but some much worse than others
With such derisory rates, it can feel pointless even bothering to move your money to a new account, but it's really important that you do.
Last year, many high street banks slashed their existing accounts to 0.1% or, in some cases, nothing at all.
Quite how something that doesn't pay interest can be called a savings account is a debate for another day, but the point is millions of us will have money in these accounts that desperately needs moving.
And while rates of up to 2.02% aren't great – they aren't even good – when the alternative is next to nothing at all, then it's worth grabbing.
What's more, there's no guarantee that savings rates won't fall even further still, so holding off could leave you with an even poorer deal.
So, let's take a look at the various best accounts on the market, broken down by the type of savings product.
Current accounts: only way to beat inflation
As we mentioned earlier, current accounts are the only way to beat inflation at its current rate.
While these accounts offer the best rates on the market, the catch is they're only suitable for savers with small pots or people who are happy to spread their money across a lot of places.
This is because they don't pay interest after a certain cut off point, as you'll see in our top picks below – but you can at least ensure some of your funds stay ahead of inflation an the fact it's instant access means you can move it back out again if by some miracle better rates appear elsewhere.
It's also worth noting that you can open up to three accounts with your spouse or civial partner (one each plus a joint account), increasing the amount you can set aside.
So what are the top picks? Virgin Money offers 2.02% on the first £1,000 in your current account, while Nationwide's FlexDirect account pays 2% interest on up to £1,500 for a year (falling to 0.25% thereafter).
You’ll need to pay in £1,000 into your account every month to qualify.
Best easy access accounts
As we already mentioned, the top traditional easy access account doesn’t beat inflation at 0.5% although you can get a better return using a non-traditional route.
Savings app Chip offers 1.25% on either up to £2,000 (for free) or up to £10,000 although this latter option incurs a £1.50 fee every month (after a free four-week trial).
You’ll also need a VIP passcode to join – personal finance site MoneySavingExpert currently offers one (MSE10) and you could also nab £10 cashback.
Sadly, this won't beat inflation, but it does offer a better return compared to traditional easy access accounts.
The best rate with a standard easy access account is 0.5% with Atom Bank, which allows unlimited withdrawals and doesn’t require you to deposit a minimum amount.
Marcus, Saga and RCI Bank all offer the next competitive rate at 0.4% and you can start saving with £1.
Alternatively, Nationwide’s Start to Save offers 1% (for 24 months) but this account is designed for those who want to put away less than £100 a month and are happy to enter prize draws.
Best notice accounts
Premium Bonds deserve an honourable mention with its 1% prize rate, although this obviously isn't suitable if you need a guaranteed income.
If you’re interested in a more traditional notice account, the best rate on the market is from Charter Savings Bank, which offers 0.67% for its 120-day notice account but you need to deposit £5,000.
Sadly, the top rate has dropped from 1% in November last year.
Charter Savings Bank and Allica Bank both offer the second most competitive rate (0.65%) with their 96-day notice accounts, but you’ll need to deposit either £5,000 or £1,000 depending on which account you choose.
Best fixed-rate accounts
Unfortunately, you cannot beat inflation with a fixed-rate account as the rates have fallen further from 1.5% to 1.4% – and this is if you lock your money away for five years.
Looking at the best one-year fix, you can currently get 0.85% with Atom Bank provided you deposit at least £50.
Over two years, the best rate is 0.9% at Zopa (minimum deposit £1,000 during the first 14 calendar days). This is a sharp drop from the 1.26% rate you could get in November.
If you want a three-year fixed account, Zopa again tops the best buy tables offering 1.01%, but you’ll need to deposit at least £1,000.
If you're looking for a five-year fixed-rate account, Shariah-compliant Gatehouse Bank offers an expected profit rate of 1.4% (minimum £1,000 deposit).
It’s worth flagging that an expected profit rate is not guaranteed – but Shariah-compliant banks have a strong track record of paying out.
Best Cash ISAs
You can’t beat inflation with a tax-free easy access Cash ISA (important for savers who don't qualify for the Personal Savings Allowance).
Kent Reliance currently has the best rate at 0.45% with its Easy Access Cash ISA, but you need to deposit £1,000 although it does allow unlimited withdrawals.
As with most savings products, fixed-term Cash ISAs aren't as competitive as they used to be, and while you were able to just about beat inflation in November, this is now no longer possible.
If you're happy to lock your money away for five years, Shawbrook Bank pays a rate of 1.1% and you’ll need to deposit at least £1,000.
Other options to consider
If you are saving for a house or your retirement and are under 40 years old, then you could benefit from a Lifetime ISA.
It allows you to save up to £4,000 of your annual ISA allowance in cash or stocks and shares.
On top of the return (or interest), the Government promises to boost what you save by 25% each year – with a limit of up to £1,000.
Moneybox, Skipton Building Society and Nottingham Building Society are among those to offer the Cash LISA at present.
None offer eye-catching rates on their own (the best is 0.85%), but the Government – or taxpayer-funded – bonus means you'll get a markedly better rate overall.
Alternatively, it might be worth considering moving some of your cash into other places that have more risk but could offer greater rewards such as peer-to-peer lending or investing.