Savings accounts that beat inflation


Updated on 15 October 2014 | 1 Comment

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

Nationwide FlexDirect

Current account

5.00%

(for first 12 months)

£1,000

£2,500

Unlimited

TSB Classic Plus

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

Vanquis High Yield

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

Santander 123 Account

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 ZopaRateSetterLendingWorks 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

The best fixed rate savings accounts

The best instant access savings rates

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