Savings accounts to beat inflation

27 June 2017

Savers are facing a battle as the UK’s rate of inflation continues to be higher than the interest rate offered by almost all savings accounts.

The consumer prices index (CPI) rate of inflation was 2.7% in the year to August 2018, according to the Office for National Statistics.

This means that just four savings accounts, five regular savings accounts and two current accounts now beat inflation.

How can I make my cash beat inflation?

Unfortunately while these four accounts beat inflation most require at least a five-year saving commitment.

The best rate on the market comes from Bank of London and the Middle East offering 2.75% EPR (read more about what EPR means here) on a seven year bond. The shortest available account doesn't strictly beat inflation, it matches it at 2.7%. This is the Charter Savings Bank Five Year Fixed Rate Bond.

See the table below for the full list of savings accounts that beat inflation. 

AccountInterest rate
Bank of London and the Middle East Premier Deposit Account - Seven Year Bond2.75%
PCF Bank Seven Year Term Deposit Issue 82.75%
Bank of London and the Middle East Premier Deposit Account - Five Year Bond2.7%
Charter Savings Bank Five Year Fixed Rate Bond2.7%

Regular savers to beat inflation

There are also a number of regular savings accounts which do pay more than inflation. However, all require you to have a current account with the provider.

Consumers with a qualifying current account with First Direct, HSBC, M&S Bank, Nationwide or Santander can access linked regular savings accounts offering 5% interest.

However, these accounts have limits to the amount holders can pay in each month.

AccountInterest rate (AER)Savings limits (per month)
First Direct Regular Saver5%£25 - £300
Nationwide Flexclusive Regular Saver5%£1 - £250
HSBC Regular Saver5%£25 - £250
M&S Bank Monthly Saver5%£25 - £250
Santander 123 Regular eSaver5%£1 – £200

Remember these accounts are regular savers – designed for you to drip feed cash into over the course of a year.

Let’s use Nationwide’s 5% regular saver as an example. You can save £250 a month in this account, but you only earn interest while your cash is in the account.

This means your first £250 deposit earns 5% interest for a full 12 months, the second £250 earns it for 11 months and so on. 

Current accounts to beat inflation

Current accounts could be a good bet for your savings – especially if you want easy access. However, only two current accounts on the market beat the current rate of inflation. Both also have a minimum monthly pay-ins and other restrictions.

The Nationwide FlexDirect account pays 5% interest on balances up to £2,500 for the first year, but this drops to 1% thereafter. You have to deposit at least £1,000 each month into the account to earn this 5% rate of interest. 

Also, the TSB Classic Plus account pays 5% interest on balances up to £1,500. You’ll need to pay in at least £500 a month, register for internet banking, opt-in for online bank statements and paperless correspondence to get this inflation-busting rate.

Use the Moneywise model savings portfolio to beat inflation

Savvy savers can also use the Moneywise model savings portfolio in the fight against inflation.

Created in conjunction with advice site Savings Champion, our two portfolios use high interest current accounts, regular savers and one-year bonds to maximise your total return. The £10,000 portfolio currently returns an inflation-busting 3.31% over a year.

Money is drip fed through the accounts to achieve the best returns. There is some legwork involved in setting up this portfolio, but we think the returns make it worthwhile.

Read our guide to getting the most out of your savings.

In reply to by Janet Noble (not verified)

Hi Janet, when a product is selected as Moneywise Best Buy we add some thumbs up and thumbs down to give users more detail about our top picks. For those that aren't Best Buys, you can see full details of the accounts by clicking through to the product page.

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