Best accounts to beat inflation

12 June 2019

Inflation can be a huge problem for savers: if it is higher than the interest rate on your savings account, the real value of your savings will be reduced over time.

In recent years, the combination of low savings rates and above-target inflation has meant that savers have had a raw deal. However, while savings rates still remain low, the good news is that inflation has started to fall and has now dipped below 2%.

The consumer prices index (CPI) rate of inflation was 2.1% in April, according to the Office for National Statistics. This is lower than April 2017 when it was 2.7% and in April 2018 when inflation was 2.4%.

This means savvy savers can now get a better return on their cash than at any time over the past two years, but they may need to lock up their money to do so.


Long-term fixed-rate bonds, which require you to lock your money away for five years, offer the best rates and can help you hedge against inflation.

The best rate on the market is from Gatehouse Bank at 2.75%. This is a Shariah-compliant account and therefore the rate is an expected profit rate (EPR). [Islamic banks, such as Gatehouse Bank, pay profit to their savers rather than interest, which is forbidden under Shariah law].

The next best paying five-year bond is from PCF Bank at 2.65% followed by RCI Bank at 2.60%.

There are even one-year bonds which are higher than the inflation rate. Al Rayan Bank is offering 2.17% for its one-year bond which can be opened online, in branch or by phone with a deposit of £1,000. This is also a Shariah-compliant account with an EPR.

Meanwhile, Gatehouse Bank and Metro bank both have accounts paying 2%.

Regular savers

There are several regular savings accounts that pay above the level of inflation.

First Direct, HSBC and M&S Bank all pay 5% interest, while Santander 123 Regular Saver and HSBC both pay 3%.

Unlike other accounts you must put something away each month, usually between £10 and £250, otherwise you can be penalised.

While regular savings accounts have some of the best rates on the market, you do have to be careful as some only offer the headline rate for a year or require you to be an existing customer.

Current accounts

Some current accounts also pay higher interest rates than inflation.

The best high interest current account out there is the Nationwide FlexDirect, which pays 5% interest on balances up to £2,500 for the first year, but this then drops to 1%. There are no monthly fees, but you have to pay in a minimum of £1,000 a month.

Another option is the TSB Classic Plus, which offers 5% interest on balances up to £1,500, provided you pay in £500 a month. Tesco Bank Current Account offers an attractive interest rate of 3% on balances up to £3,000, but you must pay in at least £750 a month.

Cash Isas

With Cash Isas, you are going to have to take out a five-year account if you want a higher rate than inflation.

Coventry Building Society, Metro Bank and Newcastle Building Society are all offering a five-year fixed rate cash Isa at 2.1%.

The next best rate is from Leeds Building Society at 2.05%.


First Direct Regular Saver at 5%

With the First Direct Regular Saver you can between £25 and £300 a month, up to a maximum of £3,600 a year.

The rate is fixed for 12 months and to open it you will need to have a First Direct current account. It can be opened online or by phone.


In reply to by anonymous_stub (not verified)

I don't know if you can give me advise on short term 1 year investment bonds. One is the company is Brukner Ferdinand and I have enquired with one or two others. They are covered by the FSCS, I got their number and checked with the FSCS. Does this mean that as they are giving a higher rate of interest that being covered by the FSCS, as they say for £85 K but some £50 k. they are safe and my investment sum is safe.If so, I do not understand why ordinary people like myself do not invest in these bonds. Can you help me at all?

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