The 25 inflation-beating savings accounts
Rising inflation rates means there are now only 25 savings accounts beating the increased levels of inflation with only one non fixed-rate ISA, down from 118 seven months ago.
These 25 accounts only beat inflation if you're a basic-rate taxpayer. For higher-rate taxpayers, there is not a single inflation-beating savings account left on the market.
After today's inflation hikes, a basic-rate taxpayer now needs to find a savings account paying 5%, while a higher-rate taxpayer needs to find an account paying at least 6.67% according to data provider Moneyfacts.
To highlight how savings rates have struggled to keep up with inflation; savers who invested £10,000 five years ago allowing for average interest, inflation and tax at 20% would have the spending power of just £9,587 today.
Almost all the inflation-beating accounts on offer are long-term fixed-rate ISAs. Top of the list is the recently launched BM Savings 5% five-year fixed-rate ISA.
The Santander Super Flexible variable cash ISA, at 4%, is the only non fixed-rate account beating inflation.
Read our round-ups of the current best savings rates and cash ISA rates
Sylvia Waycot, spokesperson for Moneyfacts, says while a fall in inflation is welcome, it won't change the fortunes of the nation's savers who are still battling against shrinking spending power and a lack of inflation-beating accounts.
"Cash ISAs limit the amount of investment and therefore return, which is yet a further hindrance when trying to make ends meet," Waycot adds.
See the table below for a list of the top inflation-beating savings accounts
||Five year fixed-rate ISA||5.00%|
|Five year fixed-rate cash ISA||4.50%|
||Online five year fixed-rate cash ISA||4.50%|
||Five year fixed-rate cash ISA Issue 161||4.50%|
||Four year fixed term fixed-rate cash ISA||4.50%|
||Four year fixed-rate ISA Saver||4.40%|
|Newcastle BS||Five year Newcastle premier ISA||4.40%|
|Principality BS||Five year fixed-rate ISA Issue 82||4.40%|
|Cheshire BS||Four year fixed-rate cash ISA (02)||4.40%|
|Derbyshire BS||Four year fixed-rate ISA Issue 37||4.40%|
|Dunfermline BS||Four year fixed-rate cash ISA Issue 29||4.40%|
|Bank of Scotland||Four year Halifax fixed-rate ISA saver||4.40%|
|Nationwide BS||Four year fixed-rate ISA||4.40%|
|Leeds BS||Five year fixed-rate ISA Issue 26||4.35%|
|West Brom BS||Four year fixed-rate ISA||4.31%|
|West Brom BS||WebSave four year fixed ISA||4.31%|
|Yorkshire Bank||Five year cash ISA fixed-rate bond Issue 9||4.25%|
|Clydesdale Bank||Five year cash ISA fixed-rate bond Issue 9||4.25%|
|Principality BS||Three year fixed-rate ISA Issue 81||4.22%|
Three year loyalty fixed-rate ISA
|Leeds BS||Three year fixed-rate ISA Issue 25||4.20%|
|Bank of Cyprus UK||Three year cash ISA bond 29th Issue||4.15%|
|Santander||Variable Cash ISA||4.00%|
|KRBS||Three year flexible fixed-rate ISA||4.00%|
|SAGA||Three year fixed-rate ISA||4.00%|
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.