1,000 savings accounts pay less than inflation

Millions of savers are earning negative “real” returns on their cash as inflation rises and banks and building societies cut rates.

Inflation in July stood at 0.6pc while the average easy-access account paid just 0.34pc in the same month, according to the Bank of England.

Savings Champion, the savings rate service, estimated that there were now around 1,000 savings accounts paying less than 0.6pc.

Yorkshire Building Society, Britain’s second largest building society, this week cut the rate on its Triple Access Saver, RSPCA Saver and Internet Saver by half a percentage point, twice the cut announced by the Bank of England earlier this month.

The news came just one day after Santander announced that it would be halving the rate on its popular 123 current account.

From November 1 savers will no longer earn tiered interest of between 1pc and 3pc depending on the size of their balance. Instead, a flat rate of 1.5pc will apply to deposits up to £20,000.

RCI Bank, the French provider, has also announced cuts. It cut the rate on its market-leading Freedom Savings Account on August 12 from 1.45pc to 1.2pc.

The easy-access account had been a best buy for 56 weeks, and despite the dramatic cut still offers the highest rate. RCI also reduced the rate on its one, two and three-year fixed-rate bonds by 0.2 percentage points.

There are still a number of highinterest current accounts that pay up to 5pc.

Nationwide’s FlexDirect account pays 5pc on balances up to £2,500 and TSB’s Classic Plus offers the same rate on deposits of £2,000. Both providers said there were no plans to change the rates.

The Club Lloyds account currently offers a generous 4pc on balances between £4,000 and £5,000. However, there are fears that this rate will not last long.

A spokesman for Lloyds Banking Group said: “Given changing market conditions, including the expectation that interest rates will be lower for longer, we will be reviewing our current accounts in due course.”

Savers can also take advantage of switching incentives. The Co- operative Bank is offering new customers £150 when they transfer their money using the Current Account Switching Service.

There are still high-interest current accounts that pay up to 5pc